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Author: 

New  York  (N.Y.)  Advisory 
Commission  on  Taxation. 

Title: 

Full  and  draft  reports, 

1905-1908 

Place: 

New  York 

Date: 

1905-1908 


MASTER    NEGATIVE   # 


COLUMBIA  UNIVERSITY  LIBRARIES 
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i  Business 
i  D683 

N42 


New  York  (City)  Advisoiy  commision  on  taxa- 
tion and  finance. 
Full  and  draft  reports,  1905-08.  New  York, 

Martin  B.  Brown  co.,  printers,  1905-08. 
11  pts.  in  1  V. 

Binder's  title. 


Li  Taxation  -  New  York  (City)    ^  Finaaace, 
Public  -  New  York   /  fN     (City) 


0 


COHimiD  ON  NEXT  CARD 


Business 

D683   New  York  (City)  Advisory  commission  on  taxa- 
N42     tion  aid  finance.  Full  and  draft  reports, 
1905-08.  (Card  Z   ) 

Contents. — Committee  on  taxation  and  revenue. 
Reports,  etc.,  submitted  at  meeting  of  May  9, 
iros. — Committee  on  taxation  and  revenue.  Re- 
port of  Kr.  Purdy  on  the  personal  property  tax, 
submitted  at  meeting  of  June  6,  1905.— Report 
of  committee  on  taxation  and  revenue,  Dec. 
1905.— Proposed  report  of  Committee  on  taxation 
and  revenue,  Dec.  1906.— Report  of  Committee 
on  taxation  and  revenue  on  personal 


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Continued  on  next  card) 


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MASTER    NEGATIVE   » 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


ORIGINAL  MATERIAL  AS  FILMED  -    EXISTING  BIBLIOGRAPHIC  RECORD 


Business 

D683   New  York  (City)  Advisory  commission  on  taxa- 
M2     tion  and  finance.  Full  and  draft  reports, 
1905-08.  (Card  3  ) 

property  taxation,  Dec.  1906. — Report  of  Com- 
mittee on  ta:<ation  and  revenue  on  personal 
property  taxation,  Jan.  2,  1907. — Report  on 
the  city  debt  in  its  relation  to  the  consti- 
tutional limit  of  indebtedness,  containing  a 
proposed  amendment  to  section  10  of  Article 
Vlli.  of  the  state  constitution.  April  1907. 
—Report  on  the  system  of  accounts  and  sta- 
tistics of  the  city  of  New  York,  June 

(Continued  on  next  card  ) 


Business  ^  .  .     a. 

D683   New  York  (City)  Advisory  commission  on  taxa- 
N42     tion  and  finance.  Full  and  draft  reports, 
1905-08.  (Card  4) 

1907. Proposed  report  of  Committee  on  taxa- 
tion and  revenue,  Nov.  1907.— Proposed  re- 
port of  Committee  on  taxation  and  revenue, 
Dec.  1907.— Report  of  Committee  on  taxation 
and  revenue  on  collection  of  arrears  of  real 
estate  taxes  and  assessments,  Dec.  1907. — 
Final  report,  Oct.  1908. 


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ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


COMMITTEE    ON 
TAXATION    AND    REVENUE, 


REPORTS,  ETC., 


Submitted    at    Meeting   of   May    9,  1905, 


REPRINTED    JUNE    9,    1906. 


•    •  •♦.••. 


>  «        •  • 

i    t        • 


New  York: 
MARTIN  B.   BROWN   COMPANY.   PRINTERS   AND   STATIONERS, 

Nos.  49  TO  57   Park  Place. 

1905. 


•      •  •• 
•    •   • 


•      # 


•      •        •   • 


•    •  • 


•         * 


......     • 

.... 

»  •  •  •  •     " 


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ADVISORY    COMMISSION 


ON 


Taxation  and  Finance, 


Chairman, 
Edgar  J.  Levkv. 

Comiuitfcc  on  Taxation  and  Rcrcnnc. 

EuwiN  R.  A.  Seligman,  Frank  A.  O'Donnel, 

Lawson  Purdy,  Alonzo  Bell, 

Francis  Lynde  Stetson,  Morris  K.  Jesup. 


Committee  on  the  City  Debt  and  Special  Assessments. 

Edward  M.  Shepard,  Charles  T.  Barxrv, 

John  L.  Cadwalader,  John  J.  Delany, 

Frank  J.  Goodnow. 


Committee  on  Aeeonnfino-  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  Joux  Cuaxi:, 

John  C.  Hertle. 


ADVISORY  COMMISSION  ON  TAXATION  AND  FINANCE. 


Committee  on  Taxation  and  Revenue. 


Members — Professor  Edwin  R.  A.  Selignian,  Chairnian: 
Lawson  Ptirdy,  Francis  Lynde  Stetson,  Frank  A.  O'DonncI, 
Alonzo  Bell,  Morris  K.  Jesup,  Edgar  J.  Levey,  ex  oiUcio: 

At  a  meeting  of  the  Committee  on  Taxation  and  Revenue, 
held  May  9,  certain  reports  were  presented  by  members  of  the 
Committee  which  had  been  requested  at  a  previous  meeting.  The 
following  resolutions  were  adopted: 

Resolved,  That  all  of  the  written  reports  and  memoranda  sub- 
mitted at  this  meeting  be  printed,  and  copies  be  distributed  among 
the  members  of  the  Commission  in  advance  of  the  next  meeting 
of  the  Committee. 

Resolved,  That  any  resolution  upon  any  new  matter  may  not 
be  brought  up  for  action  until  a  meeting  held  after  such  resolution 
shall  have  been  notified  to  the  several  members  of  the  Committee. 

Mr.  Levey  reported  that,  in  response  to  the  inquiry  he  had 
been  requested  to  make,  he  had  received  the  following  communi- 
cation from  Mr.  John  C.  Hertle,  Commissioner  of  Accounts: 


»^t 


REPORT    OF  riR.  LEVEY. 

Office  of  the  Commissioners  of  Accounts, 
Rooms  103,  104,  105,  115,  119  and  121, 
Stewart  Building,  280  Broadway, 
New  York,  April  7,  1905. 

Hon.  Edgar  J.  Levey,  Chairman  Committee  on  Taxation  of  the 
Mayor's  Advisory  Commission  on  Fitiance: 

Dear  Sir— On  March  31  I  received  your  request  to  prepare 
for  the  information  of  your  Committee  the  following  data,  viz. : 

Request  No.  i — 

Item  A — "  Amount  of  the  assessments  for  purposes  of  taxa- 
"  tion  in  the  City  of  New  York  for  the  past 
"  twenty  years,  divided  between  real  and 
"  personal  property." 

Item  B— "Amount  of  tax  actually  levied  in  each  of  these 
"  years." 

Item  C— "Amount  included  each  year  by  the  Board  of 
"  Aldermen  as  a  deficiency  item." 

Item  D — "  Arrears  of  such  taxes  uncollected,  now  outstand- 
"  ing,  divided  as  between  real  and  personal 
"  property." 

Request  No.  2 — 

"  Dates  of  sales  for  real  estate  taxes  held  during 
"  the  last  twenty  years,  and  any  figures  which 
"  will  tend  to  show  the  amount  realized  by 
"  reason  of  such  sales." 

In  reply  thereto,  I  beg  to  submit,  attached  hereto,  Schedule 
No.  I,  covering  Items  A,  B  and  C,  contained  in  your  request,  and 
Schedule  No.  2,  covering  the  data  asked  for  in  Item  D. 

I  desire  to  emphasize  the  fact  that  the  information  contained 
in  Schedules  Nos.  i  and  2  applies  to  "  The  City  of  New  York," 
as  constituted  on  tlTe  respective  dates. 


5 

In  reply  to  your  request  No.  2,  as  to  Dates  of  Tax  Sales,  etc., 
I  beg  to  report  as  follows : 

Date  of  Sales.  For  What  Purpose. 

November  6  to  30,   1886 Taxes,     Croton     Water    Rents     and 

Interests. 
November    12,   1888 Taxes,     Croton     Water    Rents    and 

Interests. 
June  ID  to  14,  1889 Taxes,     Croton    Water    Rents     and 

Interests. 
December  4,  1899,  to  June,  1900 Assessments. 

In  order  to  supply  you,  as  requested : 

"  with  any  figures  which  will  tend  to  show  the  amount 
"  realized  by  such  sales." 

In  order  to  give  you  this  information,  it  would  require  the 
services  of  not  less  than  three  accountants  for  at  least  one  month, 
as  I  find  that  for  the  Tax  Sale  of  November  6,  1886,  alone,  there 
are  over  9,000  items,  and  for  the  Tax  Sale  of  June  10,  1889,  about 
10,000  items. 

As  the  Bureau  in  which  these  records  are  kept  has  not  analyzed 
these  items,  the  total  amounts  of  the  proceeds  of  these  sales  are 
not  on  record. 

Therefore,  if  you  desire  this  information,  an  analysis  would 
have  to  be  made  of  all  the  items,  in  order  to  ascertain  what  Taxes 
were  actually  paid  as  the  result  of  the  "  Tax  Sales." 

Hoping  the  inclosed  Schedules  Nos.  i  and  2  will  fully  meet 
your  wishes,  and  that  you  will  call  upon  me  for  any  further 
information  you  may  desire  in  connection  with  the  work  of  your 
Committee,  I  am, 

\^ery  truly  yours, 

John  C.  Hertle, 


Schedule  No.  i. 
The  City  of  A'c^v  York  as  Constituted  on  the  Respective  Dates. 


Assessments  for  Purposes  of  Taxation. 

Tax  Levy. 

Deficikncies. 

Item  in 
Tax  Lew. 

Year. 

Real. 

Personal. 

Total. 

1885 

$1,168,443,137  00 

$202,673,866  00 

$1,371,117,003  00 

$32,853,518  00 

$775,123  43 

1886 

1,203,941,065  00 

217,027,221  00 

1,420,968,286  00 

33,421,389  99 

869,229  56 

1887 

1,254,491,849  00 

253,148,814  00 

1,507,640,663  00 

32,374,126  19 

527,674  23 

1888 

1,302,818,879  00 

250,623,552  00 

1.553,442,43'  00 

34,330,794  23 

529,860  12 

1889 

1.331,578,291  00 

272,260,822  00 

1,603,839.113  00 

31,145,432  45 

764,745  44 

1890 

1,398,290,007  CO 

298,688,383  00 

1,696,978,390  00 

33,211,860  22 

710,897  61 

1891 

1,464,247,820  00 

321,609,518  00 

1,785,857,338  00 

33,764,349  60 

571.502  78 

1892 

1,504,904,603  00 

323,359,672  00 

1,828,264,275  CO 

33,725,395  24 

844,350  65 

1893 

1,562,582,393  00 

370,936,136  00 

1,933,518.529  00 

35,024,397  75 

845,261  05 

1894 

1,613,057,735  00 

390,274,302  00 

2,003,332,037  00 

35,657,072  II 

594,769  09 

J895 

1,646,028,655  00 

370,919,007  00 

2,016,047,662  00 

38,403,780  92 

826801  14 

1896 

1.731,509,143  00 

374,975,762  00 

2,106,484,905  00 

44,905.042  05 

903,758  87 

1897 

1,878,186,791  00 

381,449,065  00 

2,168,635,856  00 

45032,319  88 

902,847  64 

1898 

1,856,567,923  00 

510,757,570  OO 

2,367,325,493  00 

47,354,091  20 

954.119  97 

1S99* 

2,932,445,464  00 

545,906,565  00 

3,478,352,029  00 

86,180,071  08 

1,689  877  81 

1900  a 

3,168,557,700  00 

485,575,598  00 

3,654,133,298  CO 

82,539,242  54 

1,618,473  98 

I90I* 

3,237,778,261  00 

550,192,612  00 

3,787,970,873  00 

90.071,931  77 

1,726,169  24 

1902  c 

3,330,647,579  00 

526,400,139  00 

3,857,047,718  00 

90,248,203  06 

1,730,018  42 

1903  </t-  •• 

4,751,550,826  00 

680,866,092  00 

5,432,416,918  00 

80,298,365  48 

1,522,209  07 

1904' 

5,015,463,779  00 

625,078,878  00 

5,640,542,657  00  88,759,939  01 

1 

1,687,667  20 

Note. — a.  Real  Estate  Assessment  includes  12x9,679,351  00  Special  Franchise  Assessment. 

"         d,  "  "  "  211,3^.194  00  '• 

"        c  "  "  "  220,620,155  00  "  " 

d,  "  "  "  235.184,325  00 

"         e,  "  "  "  251.521,450  00 

*  1809.  First  assessment  of  the  five  boroughs  now  included  in  the  City  of  New  York.  The  assessment  of 
previous  years  covered  that  part  of  the  present  city  Included  in  the  boroughs  of  M  tnhattan  and  The  Bronx. 

t  1903.  First  attempt  10  assess  real  estate  at  full  value.  State  Boara  of  Equalization  rated  the  assessment 
as  80^  of  fall  value  ;  and  the  asse-smenl  of  190^  as  6y%  of  full  value  for  New  York  County,  68^  for  Kings  County, 
81^  for  Queens  County,  and  75*  for  Richmond  County. 


Schedule  No.  2. 
Statement  of  Uncollected  Taxes  at  October  i.  1904. 


Year. 


1898  and  prior 

1899  

1900 

1901 

1902 

1903  


Personal. 


$10,080,034  16 
4,441,558  54 

2,735,452  74 
4,884,692  49 
4,876,086  30 
4,519,427  27 


♦31,537,251  50 


Real  Estate. 


$3,735,016  35 
1,513,121  45 
5,661,087  78 
6,572,446  66 
7,379,136  97 
7,558.930  70 


>32,4i9,739  91 


TOTAI.S. 


$13,815,050    51 

5,954,679  99 
8,  96,540  52 

",457,139  »5 
12,255,223  27 

12.078,357  97 


$63,956,991  41 


Mr.  Purdy  presented  a  report  in  regard  to  uncollectible  taxes 
together  with  a  memorandum  for  proposed  amendments  to  the 
Charter,  providing  for  the  issue  of  corporate  stock  by  the  City  for 
the  deficiency  due  to  uncollectible  taxes  as  determined  January  i, 
1905,  and  for  the  levying  of  taxes  to  provide  for  deficiencies 
annually  thereafter. 

REPORT  OF  HR.  PURDY. 

Draft  of  an  Act  to  Authorize  the  Board  of  Estimate  and  Appor- 
tionment in  The  City  of  New  York  to  Issue  Corporate 
Stock  of  the  City  for  Arrears  of  Uncollectible  Taxes. 

Section  i.  The  board  of  estimate  and  apportionment  of  The 
City  of  New  York  shall  on  or  before  the  first  day  of  October,  i9o(), 
authorize  corporate  stock  of  The  City  of  New  York  to  be  issued 
to  an  amount  equal  to  so  nuich  of  the  deficiency,  on  the  first  day 
of  January,  1905,  in  the  product  of  taxes  theretofore  levied  and 
deemed  by  the  board  to  be  uncollectible,  as  shall  not  have  been 
provided  for  in  prior  tax  levies  or  by  the  issue  of  corjwrate  stock 
of  The  City  of  New  York.  Such  corporate  stock  shall  be  author- 
ized to  be  issued  by  the  board  of  estimate  and  apportionment  with- 
out the  concurrence  or  approval  of  any  other  board  or  public  body. 

Section  2.  This  act  shall  take  effect  immediately. 


8 


Draft  of  an  Act  to  Amend  the  Greater  New  York  Charter  by 
Providing  for  the  Levying  of  Tax^es  to  Provide  for  Defi- 
ciencies in  the  Actual  Product  of  Taxes  Theretofore  Levied. 

Section  i.  Section  230  of  the  Greater  New  York  Charter  is 
hereby  amended  by  inserting  a  new  subdivision  to  be  subdivision 
first ;  subdivision  first  to  ninth  to  be  numbered  second  to  tenth,  re- 
spectively, and  the  new  subdivision  to  read  as  follows: 

First— A  sum  equal  to  so  much  of  the  deficiency,  on  the  pre- 
ceding first  day  of  January,  in  the  product  of  taxes  theretofore 
levied  and  deemed  by  the  board  to  be  uncollectible,  as  shall  not 
have  been  provided  for  in  prior  tax  levies  or  by  the  issue  of  cor- 
porate stock  of  The  City  of  New  York. 

Section  2.  Section  248  of  the  Greater  New  York  Charter  is 
hereby  repealed. 

Section  3.  By  this  section  repeal  chapter  639  of  the  Laws  of 
1905,  amending  section  169  of  the  charter. 

Section  4.    This  act  shall  take  effect  immediately. 

Memorandum  as  to  Arrears  of  Taxes  and  Proposed  Amend- 
ment. 

On  October  i,  1904,  the  uncollected  taxes  of  The  City  of  New 
York  amounted  to  the  total  sum  of  $63,956,991.41.  About  half  of 
this  amount  is  made  up  of  taxes  on  personal  property  and  half  on 
real  property.  To  offset  this  sum,  $8,286,748.52  has  been  levied 
to  provide  for  the  deficiency.  The  major  part  of  the  arrears  on 
real  f)roperty  is  good  and  collectible ;  a  part  of  it,  however,  is  not 
collectible  because  every  year  some  assessments  are  reduced  by 
court  decisions,  and  a  large  sum  was  thus  lost  by  the  decision  reduc- 
ing the  assessment  on  special  franchises.  Most  of  the  arrears  of 
personal  taxes  are  uncollectible,  and  arrears  of  personal  taxes  are 
accumulating  at  the  rate  of  about  three  millions  a  year.  Revenue 
bonds  of  the  City  issued  in  anticipation  of  the  collection  of  taxes 
remain  outstanding  and  the  amount  is  increasing  annually. 

The  following  table  shows  the  arrears  for  each  year  up  to  Octo- 
ber I,  1904,  together  with  the  provisions  for  deficiencies  for  each 
year : 


Personal 
Taxes. 

Real  Estate. 

Total. 

Deficiencies  Pro- 
vided for  in  Tax 
Levies  for  3899 
and   Subsequent 
Years. 

1898  and  prior. . . 
i8qq 

$10,080,034  16 
4.441.558  54 

2,735.452  74 
4,884,692  49 
4,876,086  30 
4,519,427  27 

$3,735,016  35 
1,513,121   45 

5,661,087   78 
6,572,446  66 

7,379.136  97 
7,558,930  70 

$13,815,050  51 

5,954.679  99 
8,396,540  52 

11,457,139  15 
12,255,223  27 
12,078,357  97 

^1,689,877  81 

IQOO 

1,618,473  08 

IQOI 

1,726,169  24 
1,730,018  42 
1,522,209  07 

IQ02 

IQO? 

Totals 

$31,537,251  50 

$32,419,739  91 

$63,956,991  41 

$8,286,748  52 

The  first  problem  is  to  fund  the  present  floating  debt  by 
issuing  corix)rate  stock ;  and  the  second  is  to  provide  against  any 
further  accumulation  of  arrears. 

In  order  that  the  existing  floating  debt  caused  by  arrears  may 
be  funded,  a  bill  is  proposed  authorizing  the  Board  of  Estimate 
and  Apportionment,  and  making  it  the  duty  of  the  Board,  to 
issue  corporate  stock  to  the  amount  necessary  to  fund  the  floating 
debt  caused  by  the  arrears  of  taxes,  which  are  uncollectible. 
For  this  purpose  some  date  must  be  fixed  as  of  which  time  the 
computation  shall  be  made,  and  the  time  is  fixed  as  of  Januar\'  i. 
1905,  on  the  assumption  that  proper  legislation  will  be  had  at  the 
session  of  the  Legislature  of  1906. 

The  question  has  been  considered  whether  it  is  desirable  to 
define  just  what  taxes  are  uncollectible,  or  to  leave  this  deter- 
mination to  the  Board  of  Estimate,  and  the  conclusion  has  been 
reached  that  it  is  best  to  leave  this  administrative  detail  to  the 
Board  without  definite  instructions.  The  Comptroller  is  a 
member  of  the  Board,  and  the  Receiver  of  Taxes  is  a  subordinate 
of  the  Comptroller.  The  Receiver  of  Taxes  has  records  which 
furnish  most  of  the  information  necessary.  The  additional  in- 
formation required  can  be  obtained  from  the  Corporation 
Counsel,  who  is  required  to  advise  the  Board  of  Estimate,  or  any 
officer  of  the  City. 


10 


II 


A  memorandum  is  attached  showing:  what  taxes  are  legally 
uncollectible. 

THE   ANNUAL  DEFICIENCY. 

The  existing  law  to  provide  against  an  accumulation  of 
arrears  is  inadequate;  it  is  contained  in  section  248  of  the 
Charter,  by  which  the  Board  of  Aldermen  is  directed  to  include 
in  any  ordinance  imposing  and  levying  taxes  such  sum  as  the 
Board  shall  deem  necessary,  not  to  exceed  three  per  centum,  to 
provide  for  deficiencies  in  the  actual  product  of  the  amount  of 
taxes  imposed  and  levied.  The  arrears  exceed  three  per  cent.,  so 
that  this  power  is  insufficient;  moreover,  it  is  made  the  duty  of 
the  Board  to  make  an  estimate  as  to  the  future.  It  is  far  better 
to  deal  with  known  quantities  than  with  future  estimates,  and  by 
the  proposed  amendment  all  arrears  will  annually  be  provided  for 
in  the  budget. 

By  chapter  639  of  the  Laws  of  1905  an  attempt  was  made  to 
provide  for  the  deficiency  in  the  collection  of  personal  taxes,  by 
amending  section  169  of  the  Charter.  The  amendment  provides 
that  corporate  stock  of  The  City  of  New  York  shall  be  issued  to 
the  amount  of  personal  taxes  in  arrears  for  five  years.  This  pro- 
vision is  inadequate  in  that  it  does  not  provide  for  the  deficiency 
caused  by  the  non-collection  of  taxes  on  real  estate,  which  are 
uncollectible.  It  frequently  happens  that  real  estate  assessments 
are  reduced  by  order  of  the  Court,  and  the  tax  on  the  amount  of 
the  reduction  is  therefore  uncollectible.  The  amendment  is  unde- 
sirable because  it  provides  for  a  continuous  increase  in  the  indebt- 
edness of  the  City,  by  the  amount  of  uncollected  personal  taxes ; 
it,  moreover,  fixes  a  standard  of  uncertain  character:  Instead  of 
providing  for  taxes  which  are  uncollectible,  it  provides  for  all 
which  are  five  years  in  arrears,  which  may  or  may  not  be  uncol- 
lectible. It  is  proposed,  therefore,  to  repeal  the  amendment  to 
section  169  of  the  Charter,  adopted  in  1905. 

Section  230  sets  forth  the  mandatory  items  to  be  included  in 
the  annual  estimate.  It  is  proposed  to  amend  this  section  by 
requiring  the  Board  of  Estimate  to  include  in  its  final  estimate  a 
sum  equal  to  so  much  of  the  deficiency,  on  the  preceding  ist  day 


of  January,  in  the  product  of  taxes  theretofore  levied  antl  deemed 
by  the  Board  to  be  uncollectible,  as  shall  not  have  been  provided 
for  in  prior  tax  levies  or  by  the  issue  of  cor^Dorate  stock  of  The 
City  of  New  York. 

By  the  passage  of  the  act  providing  for  the  issue  of  corporate 
stock  to  supply  the  uncollectible  deficiency  in  the  pro<luct  of  taxes 
outstanding  January  i,  1905,  all  arrears  on  that  date  will  be 
funded.  The  proposed  amendment  to  section  230  adheres  to  the 
same  language,  so  that  there  will  be  an  annual  clearance  of  all 
uncollectible  arrears,  and  an  erroneous  estimate  of  one  year  will 
be  corrected  at  least  in  part  the  following  year. 

In  October,  1906,  the  Board  of  Estimate  will  include  in  the 
budget  all  uncollectible  arrears  as  the  same  shall  be  on  January  i , 
1906,  and  annually  thereafter  the  amount  of  all  uncollectible  taxes 
outstanding  on  the  first  of  the  year  must  be  provided  for  in  the 
budget. 

Section  248,  being  superseded,  will  be  repealed. 

Memorandum  as  to  Uncollectible  Taxes. 

Taxes  on  Real  Estate. 

The  only  taxes  on  real  estate  which  arc  uncollectible  arise  be- 
cause assessments  are  reduced,  or  in  the  case  of  exempt  property 
vacated,  by  judicial  decision.  When  such  decisions  are  rendered 
an  order  is  served  upon  the  receiver  of  taxes  and  his  records  show 
the  amount  of  the  tax  lost. 

Taxes  on  Personal  Property. 

There  is  a  large  amount  of  taxes  on  personal  property  which  is 
uncollectible,  and  this  will  continue  to  be  the  case  so  long  as  we 
have  our  antiquated  system  of  imposing  taxes  on  all  forms  of  per- 
sonal property  in  the  same  manner  as  upon  real  estate.  The  fact 
that  such  taxes  are  uncollectible  can  in  most  cases  be  ascertained 
with  reasonable  certainty.  The  facts  appear  in  the  following 
ways : 

F/r.y/— All  taxes  on  personal  property  for  the  collection  of 
which  no  action  has  been  commenced  within  the  time  limited  bv 


12 


13 


n 


section  934  are  outlawed  and  uncollectible.  The  records  of  the 
Bureau  for  the  Collection  of  Arrears  of  Personal  Taxes  show 
such  cases. 

Second— AW  cases  in  which  the  assessment  has  been  reduced 
or  vacated  by  judicial  decision.  This  may  happen  in  four  ways: 
When  the  assessment  has  been  vacated  or  reduced  as  a  result  of  a 
review  of  the  action  of  the  Tax  Commissioners  upon  a  writ  of 
certiorari ;  when  the  assessment  has  been  vacated  because  the  per- 
son assessed  was  a  non-resident ;  when  pursuant  to  an  offer  of  judg- 
ment a  part  of  the  tax  has  been  accepted  as  payment  in  full;  when 
pursuant  to  section  934  of  the  Charter  or  section  259a  of  the  Tax 
Law  an  order  has  been  entered  remitting  part  or  all  of  the  tax. 

rjiird— Taxes  for  the  collection  of  which  actions  have  been 
brought,  judgments  obtained,  executions  issued  and  returned  un- 
satisfied. These  cases  ofifer  about  the  only  element  of  uncertainty, 
for  a  judgment  is  good  for  twenty  years,  and  although  worthless 
at  present,  it  may  sometime  have  a  value.  At  .the  same  time  a 
chance  of  anything  ever  being  collected  on  such  judgments  is  very 
remote. 

It  will  be  observed  that  all  the  facts  necessary  to  determine 
whether  taxes  on  personal  property  are  collectible  or  not  are 
within  the  knowledge  of  the  Corporation  Counsel  and  Receiver  of 
Taxes. 

Mr.  Bell  presented  a  report  in  relation  to  the  plan  for  changing 
the  date  for  the  payment  of  taxes  contained  in  Senate  Bill  329. 

REPORT  OF   HR.  BELL. 

G.  O.  No.  32.  Senate  Bill  No.  118,329.    Int.  103. 

An  Act  to  Amend  the  Greater  New  York  Charter,  as  Amended 
by  Chapter  466  of  the  Laws  of  1901,  and  Subsequent 
Amendments  Thereto,  Relative  to  Levying  Taxes  and  the 
Collection  Thereof. 

OBJECTIONS. 

This  bill  seeks,  through  amendments  to  twenty-seven  sections 
of  chapter  466  of  the  Laws  of  1901  (Greater  New  York  Charter), 
to  so  change  the  law  relating  to  assessments  and  taxation  that 


taxes  now  due  and  payable  on  the  first  Monday  in  October  of  each 
year  nmy  be  paid  on  the  first  Monday  in  January  of  the  same 
vear,  thus  advancing  the  collection  of  taxes  nine  months — the  ob- 
ject sought  by  this  advancement  being  to  do  away  with  the  present 
necessity  of  issuing  short  term  bonds  in  anticipation  of  the  collec- 
tion of  the  tax  revenue. 

If  the  object  could  be  attained  by  this  bill  the  estimated  saving 
in  interest  would  be  about  $1,500,000  each  year. 

The  plan  of  the  bill,  however,  is  so  radically  defective  that  it 
ought  not  to  become  a  law. 

The  plan  of  the  bill  proceeds  upon  the  theory  that  the  only  way 
to  advance  the  payment  of  taxes  nine  months  is  to  arbitrarily  do 
away  with  the  field  work,  revision,  hearings  and  other  details  hith- 
erto and  under  existing  law  deemed  essential  to  a  just  and  legal 
assessment. 

To  secure  this  arbitrary  assessment  the  duplicate  of  the  1006 
roll  is  to  be  ''  used  as  the  basis  for  determining  the  amount  of 
tax  to  be  levied  on  real  and  personal  estate  of  the  several  boroughs 
for  the  year  1907  (section  892a)." 

The  books  containing  these  duplicate  assessments  are  to  be 
open  for  public  inspection,  examination  and  correction  from  the 
second  Monday  in  January  to  the  first  day  of  April,  1906.  On 
the  last-named  day  the  books  "  shall  be  closed,  to  enable  the 
Board  of  Taxes  and  Assessments  to  prepare  assessment  rolls  of 
the  several  boroughs  for  delivery  to  the  Board  of  Aldermen  " 
(section  892). 

During  the  months  of  April  and  May  the  Commissioners  mav 
act  upon  applications,  take  testimony,  examine  applicants  for  the 
reduction  of  assessments,  provided  such  applications  were  filed 
prior  to  the  thirty-first  day  of  March  preceding  (section  895, 
New  York  Charter). 

Section  2  of  the  new  bill  provides: 

'•  Nothing  in  this  act  contained  shall  be  deemed  or 
construed  as  repealing  or  amending  any  of  the  sections  of 
the  Greater  New  York  Charter,  as  amended  by  chapter 
466  of  the  Laws  of  1901.  in  so  far  as  they  in  any  way  relate 
to  the  making  of  the  budget,  and  also  the  annual  record 


14 

of  assessed  valuations  of  the  real  and  personal  estate  of 
the  several  boroughs  on  which  the  taxes  for  the  year  1905 
and  1906  are  to  be  determined,  nor  is  it  to  affect  in  any  way 
the  levying  or  collection  of  the  taxes  for  said  years  1905 
and  1906,  but  the  said  budget  and  annual  records  for  said 
years  shall  be  prepared  and  the  levying  and  collection  of 
the  taxes  for  said  years  shall  proceed  in  the  manner  now 
provided  by  law  and  as  if  the  act  had  not  been  passed." 

As  the  act  is  to  take  effect  on  the  first  day  of  June,  1905,  it 
is  clear  that  the  reservation  in  section  2,  above  quoted,  applies 
only  to  the  assessments  and  taxes  for  the  years  1905  and  1906. 

It  would  appear  equally  clear  that  the  only  specific  reservation 
of  the  old  law  affecting  the  duplicate  roll  for  1907  is  that  pro- 
vided for  in  the  new  section  892a,  as  follows: 

"  Both  of  said  records  (1906- 1907)  shall  be  subject  to 
the  provisions  contained  in  section  892  of  this  act,  except 
that  the  said  records  shall  remain  open  for  public  inspec- 
tion, examination  and  correction  from  the  second  Monday 
in  January  until  the  first  day  of  April  in  said  year,  1906. 
The  second  or  duplicate  record  shall  be  used  as  the  basis 
for  determining  the  amount  of  tax  to  be  levied  on  real  and 
personal  estate  of  the  several  boroughs  for  the  year  1907." 

Section  2  provides  that: 

'•  The  annual  record  of  assessed  valuations  for  the  taxes 
to  be  levied  for  the  year  1907  shall  be  subject  to  the  same 
changes  and  corrections  as  the  annual  record  of  assessed 
valuations  for  the  taxes  to  be  levied  for  the  year  1906; 
such  corrections  and  changes  shall  be  made  within  the 
same  period,  at  the  same  time  and  in  the  same  manner  on 
each  of  said  records;  provided,  however,  that  if  it  shall  be 
found  necessary,  by  reason  of  changes  in  valuations  of 
real  and  personal  property  subsequent  to  the  preparation 
of  said  annual  record,  to  make  additional  changes  or  cor- 
rections, that  such  additional  changes  or  corrections  may 
be  made  at  any  time  prior  to  the  first  of  September,  1906, 
but  no  increase  in  valuations  by  reason  of  said  changes 
shall  be  made,  except  upon  notice  given  to  the  individual 


15 

or  corporation  affected  by  such  increase,  at  least  ten  days 
before  the  fifteenth  day  of  August  of  said  year." 

From  this  it  may  be  fairly  construed  that  the  duplicate  rolls 
for  1907  are  open  for  public  inspection,  examination  and  cor- 
rection from  the  second  Monday  of  January  until  the  first  day  of 
April,  1906,  as  provided  in  amended  section  892a  of  the  new  bill, 
and  that  under  section  2  of  the  act  parties  assessed  thereon  may 
be  heard  by  the  Commissioners  during  April  and  May  ui>on 
applications  for  reduction  of  assessments  upon  either  real  or 
personal  property  filed  in  their  offices  on  or  before  the  31st  day 
of  March,  1906. 

The  proviso  in  section  2 — that  changes  and  corrections  may 
be  made  in  the  rolls  of  1907  at  any  time  prior  to  the  first  day  of 
September,  1906,  if  "  found  necessary  by  reason  of  changes  in 
valuations  of  real  and  personal  property  subsequent  to  the  pre- 
paration of  said  annual  record,"  can  hardly  be  construed  as 
authorizing  the  addition  of  new  names  or  new  entries  upon 
the  rolls  for  1907,  after  the  first  day  of  April,  or  any  hearing 
whatever,  to  those  assessed  on  said  rolls,  except  to  those  whose 
assessments  are  to  be  increased.  Taxpayers  in  this  class  are 
entitled  to  notice,  and,  consequently,  may  be  heard  on  such 
notice  at  any  time  prior  to  September  i,  1906.  The  vast  majority 
of  the  property-owners  assessed  on  the  1907  rolls,  for  no  better 
reason  than  that  they  were  liable  on  the  rolls  for  1906,  have  no 
opportunity  to  be  heard  under  this  bill.  Their  real  estate  in  1907 
may  be  less  in  value  than  in  1906,  because  of  the  destruction  of 
the  improvements  thereon  or  for  other  reasons.  Their  personal 
property  liable  in  1906  may  have  been  lost,  sold  or  converted 
into  non-taxable  property  during  that  year,  yet  under  this  bill 
th€y  have  no  opportunity  to  establish  the  facts,  as  no  public 
inspection  or  examination  of  the  rolls  for  1907  after  March  31, 
1906,  is  provided  for,  either  through  personal  notice  (except  in 
increase  cases)  or  by  publication  in  the  newspapers  or  the 
City  Record,  as  now  required  by  law. 

This  deprivation  of  the  right  of  property-owners  to  be  heard 
on  their  assesments  before  they  ripen  into  a  tax  is  a  violation  of 
a  fundamental  right  guaranteed  by  the  State  Constitution. 

The  authorities  relied  upon  to  support  this  conclusion  are 


i6 

numerous.  Some  of  the  leading  ones  are  included  in  and  com- 
mented upon  in  the  case  of  Stuart  vs.  Palmer,  74  N.  Y.,  183.  In 
that  case  the  Court  says: 

"  The  Legislature  can  no  more  arbitrarily  impose  an 
assessment  for  which  property  may  be  taken  and  sold  than 
it  can  render  a  judgment  against  a  person  without  a  hear- 
ing.   It  is  a  rule  founded  on  the  first  principles  of  natural 
justice,  older  than  written  constitutions,    that    a    citizen 
shall  not  be  deprived  of  his  life,  liberty  or  property  with- 
out an  opportunity  to  be  heard  in  defense  of  his  rights, 
and  the  constitutional  provision  that  no  person  shall  be 
deprived  of  these 'without  due  process  of  law  '  has  its  foun- 
dation in  this  rule.     The  provision  is  the  most  important 
guaranty  of  personal  rights  to  be  found  in  the  Federal  or 
State  Constitution.      It    is   a   limitation    upon    arbitrary 
power  and  is   a  guaranty   against  arbitrary   legislation. 
No    citizen    shall    arbitrarily    be    deprived    of    his    life, 
liberty  or  property.     This  the   Legislature   can   not  do 
or  authorize  to  be  done.     '  Due  process  of  law '  is  not 
confined  to  judicial  proceedings,  but  extends  to  every  case 
which  may  deprive  a  citizen  of  life,  liberty  or  property, 
whether  the  proceedings  be    judicial,    adminstrative    or 
executive  in  its  nature  (Weimer  vs.  Bruienbury,  30  Mich., 
201).     This  great  guaranty    is    always    and    ever>'where 
present  to  protect  the  citizen  against  arbitrary  interference 
with  these  sacred  rights." 

This  arbitrary  feature  of  the  bill,  growing  out  of  the  duplicate 
roll  plan,  which  necessarily  creates  a  tax  liability  for  1907  during 
the  year  1906,  and  before  the  tax  for  1906  is  due  and  payable,  is 
so  unjust,  that  no  plea  of  expediency  can  justify  its  adoption,  and 
its  presence  as  the  basic  principle  in  the  McCarren  bill  should  be 
fatal  to  its  enactment. 

The  objections  to  the  bill  may  be  summarized  as  follows: 

I.  The  duplicate  roll  plan  is  open  to  serious  objections.  No 
provision  is  made  for  the  public  inspection,  examination  and  cor- 
rection of  the  rolls  of  1907,  except  at  the  time  when  the  books  of 
annual  record  are  open  for  public  inspection,  examination  and 


17 

correction  of  the  assesments  for  1906.  As  all  property-owners 
outside  of  New  York  have  an  opportunity  to  be  heard  on  assess- 
ments against  them  for  the  year  1907,  failure  to  grant  this  right 
in  the  pending  bill  is  an  unjust  discrimination  against  the  prop- 
erty-owners of  Greater  New  York. 

2.  Changing  the  period  for  field  work  from  September. 
October,  November  and  December  to  January,  February.  March 
and  April  is  objectionable.  It  is  transferring  important  outdoor 
work  from  the  best  to  the  worst  months  (except  April)  in  the 
year.  January,  February  and  March  are  usually  cold,  wintry 
months.  With  snow  on  the  ground  it  would  be  difficult  to  trace 
boundary  lines  or  identify  stakes  or  monuments,  while  the  low 
temperature  would  materially  interfere  with  the  work  of  recording 
data  in  the  books  carried  by  the  deputies.  The  necessary  work 
could  not  be  properly  done  in  these  months. 

3.  Changing  the  "  grievance  "  period  from  the  second  Mon- 
day of  January  to  April  i  in  each  year — to  May  i  to  July  i — is 
unwise.  Taken  in  connection  with  the  period  for  hearings 
(April  and  May),  on  applications  for  reductions,  filed  prior  to  the 
closing  of  the  books  on  April  i,  and  the  change  proposed  in  this 
bill,  confining  such  work  to  July  and  August,  we  shall  have  the 
hottest  months  of  the  year  for  the  most  important  work  of  the 
Department,  making  necessary  the  presence  of  the  taxpaper  and 
those  representing  his  interests  at  a  time  when,  usually,  they  are 
out  of  the  city  for  needed  recreation  and  health. 

4.  By  advancing  the  time  for  paying  taxes  on  the  plan  pro- 
posed, the  loss  from  the  rolls  for  1907  would  be — loss  of  the 
natural  increment  of  values  due  to  growth  and  improvements  for 
1906 — at  least  $100,000,000. 

Loss  from"  new  estates,  new  residents  and  newly-organized 
corporations  for  the  same  year,  $100,000,000. 

Loss  of  the  Special  Franchise  for  1907,  estimated  at 
$375,000,000. 

Estimated  total  loss  of  assessments  to  the  tax  rolls  of  1907, 
$575,000,000,  or,  at  present  rates,  a  loss  in  taxes  of  $8,702,165. 

5.  Amended  section  900  of  the  new  bill  makes  it  obligatory 
on  the  part  of  the  Comptroller  "  to  prepare  and  submit  to  the 
Board  of  Aldermen,  at  least  two  weeks  before  its  annual  meeting 


i8 


19 


hill 


in  each  and  every  year,  for  the  purpose  of  imposing  the  annual 
taxes,  a  statement  setting  forth  the  amounts  by  law  authorized  to 
be  raised  by  tax."     He  is  required  to  give  "  an  estimate  of  the 
probable  amount  of  receipts  into    the  City  Treasury  during  the 
fiscal  year  next  succeeding  from  all  the  sources  of  revenue  of 
the  general  funds,  including  surplus  revenue  from  the  sinkmg 
funds  of  the  Mayor,  Aldermen  and  Commonalty  of  The  City  of 
New  York,  other  than  the  surplus  revenues  of  any  such  sinkmg 
funds  for  the  payment    of    interest    on    the    City    debt    of    the 
municipal   corporation   known  as  The   Mayor,   Aldermen   and 
Commonaky  of  The  City  of  New  York,  or  the  like  debts  of  the 
municipal  and  public    corporations    by    this    act    consolidated 
as  aforesaid,  and  the  said  Board  of  Aldermen  is  hereby  author- 
ized and  directed  to  deduct  the  amount  of  such  estimated  receipt 
from  the  aggregate  amount  of  all  the  various  sums  which,  by 
law,  they  are  required  to  order  and  cause  to  be  raised  by  tax  for 
the  purposes  aforesaid,  and  to  cause  to  be  raised  by  tax  only  the 
balance  of  such  aggregate  amount  after  making  such  deductions." 
No  such  obligation  is  imposed  upon  the  Comptroller  m  the 
new  bill  for  the  tax  year  of  1907.    As  the  annual  meeting  of  th« 
Board  of  Aldermen  would  be  the  first  Monday  of  July,  1906,  and 
the  report  required  from  the  Comptroller  under  section  900  refers 
to  said  annual  meeting  and  tax  for  1906,  and  under  the  new  bill 
would  refer  to  the  annual  meeting  of  the  Board  of  Aldermen 
October  1.   1907,  relating  to  the  tax  for  1908,  it  would  appear 
that  no  provision  has  been  made  in  the  new  bill  for  this  important 
statement  from  the  Comptroller  to  the  Board  of  Aldermen  at 
the  meeting  September  15,  1906,  authorized  by  the  new  bill,  for 
the  purpose  of  fixing  the  tax  rates  on  the  duplicate  assessment 
rolls  for  1907. 

6.  Section  2  of  the  new  bill  required  the  Board  of  Taxes  and 
Assessments  to  certify  to  the  correctness  of  the  rolls  of  1907. 
'^The  rolls,  so  certified,  must,  on  the  15th  day  of  September, 
1906,  be  delivered  by  the  Board  of  Taxes  and  Assessments  to  the 
Board  of  Aldermen,  which  shall  meet  at  noon  on  that  day  at  the 
City  Hall,  or  usual  place  of  meeting,  for  the  purpose  of  receiv- 
ing the  same  and  for  the  purpose  of  performing  such  other  duties 
in  relation  thereto  as  are  prescribed  by  law." 


As  the  only  duties  "  prescribed  by  law  "  api>ear  to  relate  to 
the  annual  meeting  of  the  Board  of  Aldermen  to  be  held  on  the 
first  Monday  in  July,  1906,  for  the  tax  year  of  1906,  and,  under 
the  new  bill,  the  first  day  of  October,  1907,  for  the  year  of  1908, 
it  may  be  open  to  question  whether  the  failure  in  section  2  of  the 
new  bill  to  provide  for  the  Comptroller's  statement  required 
under  section  900  to  be  submitted  to  the  Board  of  Aldermen 
"  at  least  two  weeks  before  its  annual  meeting  in  each  and  every 
year  for  the  purpose  of  imposing  the  annual  taxes,"  and  the 
further  failure  to  specifically  refer  to  the  sections  imposing  cer- 
tain duties  to  be  performed  by  the  Board  of  Aldermen  at  their 
annual  meeting,  or  to  reiterate  the  ix)wers  therein  conferred, 
do  not  leave  the  Board  of  Aldermen  without  power  to  fix  the 
tax  rate  for  the  assessments  on  the  duplicate  roll  for  1907,  and 
to  perform  other  important  duties  relating  to  said  assessments 
at  their  meeting,  to  be  held,  as  provided  in  section  2  of  the  new 
bill,  on  the  fifteenth  day  of  September,  1906. 

7.  Section  907  requires  the  Board  of  Taxes  and  Assessments 
to  furnish  the  Supervisor  of  the  City  Record  with  a  copy  of  the 
Annual  Record  of  the  assessed  valuation  of  real  estate  within 
three  weeks  after  the  delivery  of  the  assessment  rolls  to  the  Board 
of  Aldermen.  Under  section  1527  (New  York  Charter)  this  copy 
is  to  be  published  in  the  City  Record  within  ninety  days  after  the 
delivery  of  said  copy  to  the  Supervisor.  This  would  require  the 
publication  of  the  assessment  rolls  of  1906  during  the  last  week 
of  October,  1906,  or  two  wxeks  after  the  copy  of  the  duplicate 
rolls  for  1907  has  been  furnished  to  the  Supervisor  of  the  City 
Record  under  the  same  law.  As  this  publication  for  each  year 
will  cost  the  City  from  $40,000  to  $50,000,  it  would  appear  a 
waste  of  time  and  money  to  publish  the  assessment  rolls  for  1907, 
practically  covering  the  same  data  as  the  rolls  for  1906  and  pub- 
lished within  two  months  after  the  publication  of  the  rolls  for 
1906. 

8.  Under  this  bill  the  tax  for  1906  becomes  "  due  and  payable  " 
on  the  first  Monday  of  October,  1906.  The  tax  for  1907  "  may 
be  paid  "  January  i,  1907,  three  months  after  the  time  when  the 
1906  tax  is  due  and  payable.  This  will  impose  a  hardship  upon 
the  average  taxpayer  and  will  force  many  to  borrow  money  for 


w^ 


20 


21 


prompt  payment  of  tax  or  compel  them  to  defer  payment  until 
the  tax  becomes  a  lien  and  interest  at  7  per  cent,  per  annum 
begins  to  run. 

9.  Under  this  bill  a  rebate  of  3  per  cent,  per  annum  is  allowed 
on  payments  made  between  the  ist  of  January,  1907,  and 
December  i,  1907.  Those  who  borrow  money  to  pay  their  taxes 
must  pay  5  or  6  per  cent,  interest.  The  rebate  allowed  is  no  in- 
ducement to  those  who  are  forced  to  borrow  or  to  those  who 
can  profitably  use  their  money.  Thus,  failure  to  collect  the  taxes 
in  the  early  months  of  the  year  would  defeat  the  object  of  the 
bill  and  compel  the  issue  of  short-term  bonds. 

10.  Beginning  the  work  of  assessments  at  the  first  of  the  year 
instead  of  the  last,  makes  it  impossible  to  include  in  the  rolls 
the  accretions  of  the  year,  due  to  natural  growth,  improvements, 
etc.,  estimated  at  $100,000,000;  new  estates;  corporations  or- 
ganized during  the  year;  the  personal  property  of  new  residents, 
etc.,  estimated  at  $100,000,000.  Special  franchise  assessments 
estimated  at  $375,000,000— a  total  loss  in  assessments  on  the  rolls 
for  1907  of  $575,000,000,  or  a  tax  loss  at  1.51  of  $8,702,165. 

11.  Under  existing  law  the  tax  becomes  a  lien  on  the  first 
Monday  in  October,  about  Sy2  months  after  the  opening  of  the 
books  of  Annual  Record  for  public  inspection,  etc.  Under  the 
new  bill  the  tax  becomes  a  lien  October  i  of  the  year  following 
the  preparation  of  the  rolls,  or  17  months  after  the  opening  of 
the  annual  record  for  public  inspection,  etc. 

12.  Under  existing  law  interest  on  unpaid  taxes  runs  from 
January  i,  or  three  months  and  a  half  after  the  tax  rolls  are 
delivered  to  the  Receiver  of  Taxes.  Under  the  new  bill  interest 
on  unpaid  taxes  runs  from  October  1  in  the  year  following' the 
delivery  of  the  tax  rolls  to  the  Receiver  of  Taxes,  or  a  period 
of  nine  months  after  the  delivery  of  the  rolls  to  the  Receiver. 

The  accompanying  statement  shows  in  comparative  form  the 
essential  features  of  the  law  now  in  force  and  the  changes  therein 
under  the  proposed  amendments. 


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Mr.  Bell  further  reported  that  he  had  prepared  amendments  to 
the  Tax  Law  and  the  New  York  Charter  relating  to  various  de- 
fects in  the  law,  together  with  an  explanatory  memorandum  in 
each  case. 


Amendments  Proposed  by  Mr.  Bell. 

An  Act  to  Amend  the  Personal  Tax  Law  in  Relation  to  the  Taxa- 
tion of  Personal  Property. 

The  People  of  the  State  of  Nezv  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section  i.  Section  two,  subdivision  five,  of  chapter  nine  hun- 
dred and  eight  of  the  laws  of  eighteen  hundred  and  ninety-six,  as 
amended  by  chapter  seven  hundred  and  twelve  of  the  laws  of 
eighteen  hundred  and  ninety-nine,  entitled  "An  act  in  relation  to 
taxation,  constituting  chapter  twenty-four  of  the  general  laws,"  is 
hereby  amended  to  read  as  follows : 

Section  2 — Subdivision  5.  The  terms  "  personal  estate  "  and 
"  personal  property,"  as  used  in  this  chapter,  include  chattels,  seats 
or  membership  in  stock  or  other  exchanges  or  business  associa- 
tions when  the  same  have  a  market  value  and  are  subjects  of  pur- 
chase and  sale;  money,  things  in  action,  debts  due  from  solvent 
debtors,  whether  on  account,  contract,  note  bond  or  mortgage ; 
debts  and  obligations  for  the  payment  of  money  due  or  owing  to 
persons  residing  within  this  State,  however  secured  or  wherever 
such  securities  shall  be  held ;  debts  due  by  inhabitants  of  this  State 
to  persons  not  residing  within  the  United  States  for  the  purchase 
of  any  real  estate ;  public  stocks,  stocks  in  moneyed  corporations, 
and  such  portion  of  the  capital  of  incorporated  companies,  liable 
to  taxation  on  their  capital,  as  shall  not  be  invested  in  real  estate. 

Section  3.  This  act  shall  take  effect  immediately. 
Words  in  italic  are  new  matter;  words  inclosed  in  brackets  [   ]  are  to  be  omitted. 


REMARKS. 


The  purpose  of  this  amendment  is  to  bring  within  the  taxing 
power  of  the  State  a  large  amount  of  personal  property  which, 
under  existing  law,  wholly  escapes  taxation. 


•      23 

For  the  purpose  of  the  transfer  tax,  seats  in  the  New  York 
Stock  Exchange  are  held  by  the  courts  to  be  personal  property, 
and  their  value  has  been  included  in  the  appraised  value  of  estates. 

In  the  case  of  Lemmon  vs.  Feitner,  167  N.  Y.,  i,  the  assess- 
ment of  the  value  of  a  Stock  Exchange  seat  was  set  aside  for  the 
reason  that  it  was  not  personal  property  under  the  somewhat  re- 
stricted definition  of  the  Tax  Law  (Laws  1896,  chapter  908,  sec- 
tion 2). 

In  the  Matter  of  Hellman,  174  N.  Y.,  254,  a  seat  in  the  New 
York  Stock  Exchange  was  held  to  be  personal  property  within 
the  meaning  of  section  242  of  the  Tax  Law,  and  liable  to  the 
Transfer  Tax. 

There  is  no  good  reason  why  property  of  this  character,  having 
a  market  value,  and  subject  to  purchase  and  sale,  should  not  be 
taxable  in  the  hands  of  a  resident,  and  consequently  in  the  hands 
of  a  non-resident,  as  capital  invested  in  business  in  the  State  of 
New  York. 


An  Act  to  amend  the  Tax  Law  in  relation  to  the  assessment  of 
personal  property  belonging  to  residents  of  this  State. 

The  People  of  the  State  of  Nezv  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section  i.  Chapter  908  of  the  laws  of  eighteen  hundred  and 
ninety-six,  entitled:  ''  An  Act  in  relation  to  Taxation,  constitu- 
ting chapter  twenty-four  of  the  General  Laws,"  is  hereby 
amended  by  inserting  therein  a  new  section,  to  be  section 
thirty-six-a  thereof,  and  to  read  as  follows: 

Section  36a.  When  the  assessment  for  personal  property  is 
canceled  on  the  sworn  statement  of  the  person  or  persons 
assessed  that  his  or  their  legal  residence  is  in  another  tax  dis- 
trict of  the  state;  the  assessors  of  the  tax  district  wherein  said 
cancellation  was  made,  or,  if  made  in  the  city  of  New  York,  the 
board  of  taxes  and  assessments  shall  immediately  send  written 
notice  of  said  cancellation  and  the  reasons  therefor  to  the 
assessors,  or  to  the  board  of  taxes  and  assessments,  of  the  tax 
district  of  the  state  in  which  the  party  whose  assessment  has 
been  canceled  claims  a  residence,  and  the  name  or  names  so  sent 


I' 


)i 


24 

and  received  may  be  entered  on  the  assessment  rolls  of  said  dis- 
trict, together  with  the  assessments  thereon,  during  the  time 
when  said  rolls  are  open  for  public  inspection,  examination  and 
correction;  provided,  however,  that  written  notice  shall  be  sent 
of  such  entry  to  the  person  or  persons  affected  thereby  at  least 
ten  days  before  the  final  closing  of  the  tax  books  in  said  tax 
district. 

Section  2.  This  shall  take  effect  immediately. 

REMARKS. 

Section  36A.  The  purpose  of  this  amendment  is  to  discourage 
tax  dodging  in  the  State  of  New  York.  At  present  a  personal 
property  owner  can  convert  his  summer  home  into  his  legal 
residence  and  because  his  intention  is  not  made  known  to  the 
assessors  of  the  town  in  which  he  claims  residence,  he  may  go 
untaxed  for  years. 

Under  the  proposed  amendment  it  is  made  the  duty  of  the 
assessors  of  every  tax  district  in  the  State,  whenever  a  person 
swears  off  his  taxes  on  the  ground  that  he  is  a  legal  resident 
of  another  tax  district  in  the  State,  to  immediately  notify  the 
tax  officials  of  said  district  of  the  fact,  so  as  to  enable  them 
to  place  the  name  and  assessment  on  the  tax  rolls  of  their  dis- 
trict and  give  notice  to  the  party  assessed  that  the  entry  has 
been  made. 

By  this  means  there  will  be  no  premium  placed  on  frequent 
changes  of  residence.  The  property  owner  will  soon  understand 
that  an  equal  liability  to  taxation  will  confront  him  wherever 
he  may  reside  in  the  State. 

An  Act  to  Amend  the  Tax  Law  in  Relation  to  Exemptions. 

The  People  of  the  State  of  New  York  Represented  in  Senate 
and  Assembly  do  enact  as  follows: 

Section  i.  Subdivision  13  of  section  4,  chapter  908  of  the 
Laws  of  1896,  entitled  "An  Act  in  Relation  to  Taxation,"  is  hereby 
amended  to  read  as  follows : 

Subdivision  13.  A  bond,  mortgage,  note,  contract,  account  or 
other  demand,  belonging  to  any  person  not  a  resident  of  this  state, 


sent  to  or  deposited  in  this  state  for  collection ;  the  products  of 
another  state,  owned  by  a  non-resident  of  this  state  [and  consigned 
to  his  agent  in  this  state  for  sale  on  commission  for  the  benefit  of 
the  owner]  sent  here  on  orders  filled  in  another  state  for  delivery, 
on  said  orders,  to  the  purchaser  or  purchasers  of  said  products; 
moneys  of  a  non-resident  in  this  state,  under  the  control  or  in  the 
possession  of  his  agent  in  this  state,  when  transmitted  to  such 
agent  for  the  purpose  of  investment  or  otherwise. 
Section  2.  This  act  shall  take  effect  immediately. 

Words  in  italic  are  new  matter;  words  inclosed  in  brackets  [  ]  are  to  be  omitted. 

REMARKS. 

Subdivision  13,  Section  4 — Tax  Laiv. 

The  law,  as  it  now  stands,  allows  the  products  of  another 
State,  owned  by  a  non-resident  of  this  State,  to  be  brought  into 
this  State  in  unlimited  quantities  and  sold  here,  without  being 
liable  to  taxation.  The  only  condition  imposed  is,  that  such 
products  shall  be  consigned  to  an  agent  in  this  State  and  sold 
for  the  benefit  of  the  owner.  Under  this  exemption,  non-resi- 
dent personal  property,  valued  at  millions  of  dollars,  is  sold  in 
our  market,  or  stored  in  our  warehouses;  without  contributing 
a  dollar  to  the  expenses  of  the  City  or  State. 

This  is  unjust  to  the  City  and  a  wrong  to  our  resident  business 
men.  It  is  a  clear  discrimination  in  favor  of  the  non-resident, 
and  finds  no  warrant  in  any  claim  that  he  may  set  up  of  con- 
stitutional rights  under  our  interstate  commerce  privileges. 

Under  the  proposed  amendment  this  discrimination  will  be  no 
longer  possible,  and  non-resident  business  will  be  required  to 
bear  such  proportionate  share  of  the  burdens  of  taxation  as 
may  be  imposed  within  clearly  defined  constitutional  limits. 

An  Act  to  amend  the  Tax  Law  relating  to  the  cancellation  and 
reduction  of  assessments  and  the  remission  of  taxes. 

The  People  of  the  State  of  Neiv  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section   i.  Chapter  nine  hundred  and  eight  of  the  laws  of 
eighteen  hundred  and  ninety-six,  entitled  "An  act  in  relation  to 


l! 


26 

taxation,  constituting  chapter  twenty-four  of  the  General  Laws," 
is  hereby  amended  by  inserting  therein  a  new  section,  to  be  section 
one  hundred  and  ten  thereof,  and  to  read: 

Section   ho.  Assessments  canceled  or  reduced.     If  any  as- 
sessment or  assessments  included  in  the  equalized  valuation  of 
real  and  personal  property,  as  fixed  by  the  state  board  of  equali- 
zation, shall  be  canceled  or  reduced  or  the  tax  thereon  remitted 
by  final  order  of  the  court  or  under  the  provisions  of  existing 
laws  relating  to  the  cancellation  and  reduction  of  assessments, 
and  the  remission  of  taxes,  it  shall  be  the  duty    of    the    state 
comptroller  on  application  of  the  treasurer  of  any  county  where- 
in said  assessment  was  made,  or,  if  made  in  the  city  of  New 
York,  on  the  application  of  the  comptroller  of  said  city,  and  on 
satisfactory  proof  of  such  cancellation,  reduction  or  remission, 
to  cancel— if  unpaid— and  to  refund,  if  paid,  the  state  tax  im- 
posed and  levied  upon  said  assessment  or  assessments  so  can- 
celed or  reduced  or  upon  which  the  tax  imposed  and  levied  has 
been  remitted  by  the  duly  constituted  authorities  empowered 
to  make  such  cancellation,  reduction  or  remission,  provided  the 
application  has  been  filed  with  the  state  comptroller  for  such 
cancellation,  reduction  or  repayment,  within  two  years  of  the 
final  cancellation  or  reduction  of  said  assessment  or  assessments, 
or  the  remission  of  tax  thereon,  by  the  constituted  authorities, 
as  provided  by  law. 

Section  2.  This  act  shall  take  effect  immediately. 

REMARKS. 

Section  no.  The  purpose  of  this  amendment  is  to  give 
authority  to  the  State  Comptroller  to  cancel,  if  unpaid,  and  to 
refund,  if  paid,  any  State  tax  imposed  upon  assessments  that  have 
been  legally  set  aside  by  final  action  of  the  courts,  or  canceled 
or  reduced  by  other  legal  authority,  provided  such  assessments 
were  included  in  the  equalized  assessed  valuations  upon  which  the 
State  tax  was  imposed. 

The  imposition  of  a  tax  implies  that  something  exists  capable 
of  being  taxed.  If  there  is  nothing  to  tax,  a  tax  erroneously 
imposed  should  not  stand.  If  the  State  is  convinced  that  the 
basis  of  the  tax  has  been  destroyed  by  the  courts  or  other  legal 


27 

authority,  the  tax  itself  should  be  canceled,  if  uni)aid,  or  refunded, 
if  paid. 

The  section  gives  the  City  substantially  what  the  City  and 
State  gives  the  individual  under  existing  laws— relief  from  a  tax 
erroneously  imposed. 

An  Act  to  amend  the  Greater  New  York  Charter  relative  to  the 
power  of  the  department  of  taxes  and  assessments  to  add 
certain  property  and  names  to  the  assessment  rolls. 

The  People  of  the  State  of  New  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section  i.  Chapter  four  hundred  and  sixty-six,  title  one  of 
chapter  seventeen,  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  by  inserting  therein  a  new  section,  to  be  section  eight 
hundred  and  ninety-four-a  thereof  and  to  read  as  follows : 

Section  894a.  During  the  time  fiiat  the  books  of  annual  rec- 
ord of  the  assessed  7'aluation  of  real  and  personal  estate  of  the 
several  boroughs  are  open  for  public  inspection,  examination  and 
correction,  the  board  of  taxes  and  assessments  shall  hare  power 
to  add  or  insert  in  the  rolls  of  assessment  of  said  annual  record 
any  property,  or  the  name  of  the  ozmer  thereof,  liable  to  assess- 
ment on  the  day  when  said  books  are  opened,  and  the  assessed 
valuation  of  said  property,  which  may  have  been  omitted  from 
such  rolls,  upon  giving  personal  notice  to  the  owner  of  the  prop- 
erty or  his  agent  at  least  ten  days  prior  to  adding  the  same. 

Section  2.    This  act  shall  take  effect  immediately. 
Words  in  italic  are  new  matter;  words  inclosed  in  brackets  [   ]  are  to  be  omitted. 

REMARKS. 

Section  894a.  The  purpose  of  this  section  is  to  give  the  Board 
of  Taxes  and  Assessments  the  power  to  add  to  the  assessment 
rolls,  after  the  books  are  opened  and  before  their  close,  such 
property  as  may  have  been  taxable  under  the  law  at  the  tirae  the 
books  were  opened. 

A  like  provision  is  incorporated  in  the  Charter  of  the  City 
of  Watervliet,  chapter  905,  section  i,  title  11,  Laws  of  1896.  It 
reads  as  follows: 

"  During  the  time  the  assessors  re#ew  any  tax  or  assessment 
they  shall  have  power  to  add  or  insert  in  such  assessment  roll 


28 

ativ  property  liable  to  assessment  and  the  valuation  thereof, 
which  may  have  been  omitted  from  such  rolls,  upon  giving 
personal  notice  to  the  owner  of  such  property  or  his  agent  at 
least  ten  days  prior  to  adding  the  same." 

This  will  enable  the  Commissioners  to  add  to  the  rolls  real 
estate  that  may  have  been  omitted,  and  to  avail  themselves  of 
the  information  obtained  during  the  examination  period,  as  to 
taxable  personal  property  not  on  the  rolls  at  the  opening  of  the 
books. 

An  Act  to  amend  the  Greater  New  York  Charter  relative  to  the 
power  of  the  department  of  taxes  and  assessments  to  remit 
or  reduce  a  tax. 

The  People  of  the  State  of  New  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section  i.  Section  eight  hundred  and  ninety-seven  of  the 
Greater  New  York  Charter  as  amended  by  chapter  one  hundred 
and  ninety-two  of  the  laws  of  nineteen  hundred  and  two,  is  hereby 
amended  to  read  as  follows : 

Section  897.  The  board  of  taxes  and  assessments  is  hereby 
invested  with  power  to  remit  or  reduce  a  tax  where,  in  the  opinion 
of  the  corporation  counsel,  lawful  cause  therefor  has  been  shown. 

It  may  remit  or  reduce  if  found  excessive  or  erroneous  a  tax 
imposed  upon  real  or  personal  property.  It  shall  require  a  ma- 
jority of  the  commissioners  of  taxes  and  assessments  to  remit  or 
reduce  [the  assessed  valuation  of  personal  property]  a  tax,  and 
no  tax  on  real  or  personal  property  shall  be  remitted,  [canceled] 
or  reduced  unless  the  person  or  persons  aggrieved  shall  satisfy  the 
board  of  taxes  and  assessments  that  illness  or  absence  from  the 
city  has  prevented  the  filing  of  the  complaint  or  making  the  appli- 
cation to  the  said  board  within  the  time  allowed  by  law  for  the 
correction  of  [taxes]  assessments.  Any  remission  or  reduction  of 
taxes  upon  the  real  or  personal  estate  of  individuals  or  corporations 
must  be  made  within  one  v-ear  after  the  delivery  of  the  books  to  the 
receiver  of  taxes  for  the  collection  of  such  tax. 

Section  2.  This  act  shall  take  effect  immediately. 
Words  in  italic  are  new  matter;  words  inclosed  in  brackets  [   ]  are  to  be  omitted. 


29 

REMARKS. 

Section  897.  The  purpose  of  the  amendment  is  to  correct  the 
section  so  as  to  more  clearly  express  its  intent.  As  far  as  the  re- 
mission or  reduction  of  a  tax  is  authorized  it  is  made  applicable 
to  real  as  well  as  personal  property. 

"The  time  allowed  by  law  for  the  correction  of  taxes"  is 
changed  to  "  for  the  correction  of  assessments,"  as  there  is  no 
time  allowed  by  law  for  the  correction  of  taxes,  aside  from  that 
provided  in  this  section. 


Mr.  Seligman  presented  a  report  in  relation  to  the  receipts 
and  expenditures  of  the  cities  of  London,  Paris  and  Berlin,  which 
he  had  procured  to  be  made  by  one  of  the  students  of  Columbia 
University,  Mr.  Meyer  Jacobstein. 

riR.  SELIOriAN'S  REPORT. 

London  Taxation — Local. 

London  derives  her  revenues  from  four  chief  sources :  Rates 
(General  Property  Tax),  Imperial  Grants,  Receipts-in-Aid  and 
Indirect  Local  Taxes. 

Rates — Outline  Summary. 

General  Property  TavV— About  72%  of  total  receipts  come 
from  Rates  annually  levied  on  the  assessed  value  of  ''fixed" 
property  (real  estate).  The  assessed  value  is  arrived  at  by  using 
"  rentals  "  as  a  basis.  The  Tax  is  levied  on  the  occupier  and  paid 
by  him  in  first  instance. 

Exemptions  and  "  differentials  "  : 

(a)  Unoccupied  lands  exempt  totally  (except  in  City  of 

London) ; 

(b)  Property    used    for    religious,    educational,    scientific 

purpose  exempt ; 

(c)  Crown  lands,  public  roads,  bridges,  etc.,  exempt. 

(d)  Special  (reduced)  rates  for  agricultural  and  meadow 

lands ; 


30 

(c)  Special  rating  or  assessment  of  railroad  property- 
Railway  stations  are  assessed  on  a  certain  per- 
centage of  the  site  and  structural  value  of  the 
station  property.  The  "  running  line  "  is  assessed 
on  the  basis  of  "  profits."  After  the  net  annual 
value  is  thus  ascertained  (on  basis  of  profits), 
deductions  are  allowed  according  to  the  "  Paro- 
chial Assessment  Act"  of  I836; 

(f)  Industrial    personal    property,    like    machinery    and 
stocks,  practically  exempt ; 

(g)  Electric  works,  telephones,  docks,  r/c— haphazard 
evaluation  for  assessment.  An  attempt  is  made 
to  evaluate  a  particular  plant  by  comparing  it 
with  plants  in  other  localities  where  valuations 
have  already  been  ascertained. 

There  is  no  separation  of  site  and  structure  valuations. 

The  tax  incidental  to  property  in  England  amounts  to  about 
Jc  of  whole  local  revenues.  Of  this  88%,  only  6%  is  paid  by 
personal  property. 

Local  taxation  in  London  is  almost  a  single  tax  on  fixed, 
tangible  property. 

For  detailed  criticism  of  this  system  of  taxation  see  report  of 
"  Royal  Commission  on  Local  Taxation,"  1901. 

"  Rates  "  have  risen  from  5d.  to  -jA.  per  £  in  fifteen  years 
( 1889-1903). 


Imperial  Subventions. 

These  Imperial  subventions  yield  annually  about     12%     of 
total  London  receipts. 

These  subventions  or  grants  or  assignments  come  legally  out 
of  a  national  fund  known  as  the  "  Local  Taxation  Account," 
which  are  collected  (in  the  main)  by  national  authorities  and  used 
for  local  purposes. 


51 

These  national  "  assignments  "  come  from  three  chief  sources: 

I,— License  Duties:  Liquor  license  fees,  paid  entirely  to 
the  locality   (London)   wherein  collected. 

U.—Hstate  Duties:  Revenue  collected  by  Imperial  Ciovem- 
ment  from  inheritance  and  income  tax  is  appor- 
tioned among  all  cities  on  basis  of  grants  made 
in  1888.  London  receives  about  22%  of  all  pro- 
bate duty  allocated  to  England  and  Wales. 

Ill— Customs  and  Excise:  A  surtax  of  3d.  per  barrel  of 
beer,  6d.  per  gallon  of  spirits.  80%  of  entire 
surtax  goes  into  Local  Taxation  Account.  Lon- 
don receives  to-day:  First,  £300,000  for  police 
fund;  Secondly,  a  fixed  proportion  of  residuum, 
according  to  the  arbitrary  proportion  existing  in 
1888. 
These  subventions  are  "  assigned  "  for  special  purposes,  such 
as  police  fund,  education,  poor  fund,  etc. 


Indirect  Local  Taxation. 

These  indirect  taxes  yield  only  a  very  small  fraction  of  the 
entire  local  revenue.  The  average  annual  receipts  from  this 
source  has  been  about    2>4%    of  total. 

The  several  more  important  items  of  these  indirect  taxes  are: 

(i)  Licenses,  duties,  etc.,  collected  by  Inland  Revenue 
Commissioners  and  turned  over  to  London 
County  Council. 

(2)  Licenses  for  petroleum,  explosives,  slaughter-houses, 

theatres,  locomotives,  "building-acts,"  etc.; 

(3)  Market  dues  and  tolls; 

(4)  Burial  fees; 

(5)  Fees  for  public  carriages,  fees  from  pedlars,  etc.; 

(6)  Tax  on  fire  insurance  companies  [  £35  per  million  £s 

of  insurance  effected  in  London]. 


(( 


32 

Receipts-in-A  id." 


These  receipts-in-aid  represent  about  13%  of  total  revenue 
collected  in  London  for  local  taxation. 

These  receipts,  however,  do  not  represent  an  actual  net 
income  to  the  city.  In  some  cases  the  receipts  are  merely  repay- 
ments or  fees  for  services  rendered  by  the  city. 

The  chief  "  receipts  "  which  lessen  expenditure  and  reduce 
taxation  come  from: 

(i)  Fees  and  fines; 

(2)  Parish  and  ancient  city  property; 

(3)  Municipal  property. 

If  we  combined  these  "  receipts-in-aid  "  with  the  so-called 
"  indirect  local  tax,"  these  two  taken  together  would  yield  about 
15%  of  the  entire  net  income  of  London. 


33 


Relative  Percentages  of  Revenues  from  Three  Chief  Sources  for 

Ten  Years,  1 890-1900. 


1890. 


1891. 


Rates -730 

Receipts-in-aid 1  '^S* 

Imperial  grants •  *3* 

n     local  ) 
c,  etc...  \ 


Balance    from     local  ^  i    qqj 
indirect  tax, 


.714 
.163 

.122 
.OOI 


1892. 


.698 

.138 
.142 
.022 


1893. 


.716 

.143 
•137 
.014 


1894. 


% 
.725 

.128 
.129 
.018 


1895.   1896. 


.744  -746 
.097  .098 
.134     .098 

.025  ;  .058 


•It 

1897.    1898. 

1899. 

% 

^ 

in 
C 

r'  i 

f? 

•7«5 

.702 

.722 

**    — 

":5j     .129 
1-  1     -ioz 

.145 

•131 

.099 

.121 

a  0 

1 

1 1  -054 

.054 

.026 

Amounts  Collected  from  Three  Chief  Sources  in  London,  from 

1895-1900. 


Sources 


Rates 

Receipts-in-aid 

Imperial  grant* 

Total  (including  oiher  \ 
revenues),  local — in-  V 
direct ) 


1895. 


1896.        !  1897. 


1898. 


9.904.675 

i,3>  1.744 

i,3S4.o88 


13,607,417 


£ 
10,433.757 

i,38i.37» 
1,382,826 

13,981,297 


o 
c 

(/) 

at  "* 
•^     » 

i 

U 


£ 
10,401,441 

1,884406 
1.483,437 


1899. 


114,532,825 


£ 
11.255.425 

2,325.437 
1.597,162 


16,028,692 


From  this  brief  survey  it  is  evident  that  London's  system  of 
local  taxation  is  based  almost  exclusively  on  real  estate.  Personal 
property,  including  intangible  industrial  capital,  is  not  taxed. 
From  London  let  us  pass  to  Paris  and  inspect  the  system  in  vogue 
there.  * 


~K 


li  !! 


34 

Classification  of  Parisian  Revenues. 

The   l^arisian   revenues  are  here  grouped  under  four  main 
classes:  The  Direct  Tax,  the   Octroi,  the  Indirect  Taxes   and 
National  Grants.     The  Direct  Tax  ("  Centimes  additionnels  ")  is 
added  to  or  tacked  on  to  the  general  State  tax,  real  and  i>ersonal. 
The  property  tax  is  thus  used  primarily  for  national  purposes 
and  onlv  secdndarilv  for  local  purposes— the  reverse  of  our  Amer- 
ican system  within  the  several  States.     The  present  tendency  m 
Paris  is  to  increase  the  revenues  that  come  from  this  Direct  Tax. 
The  Octroi  is  too  familiar  to  need  explanation.     The  present 
tendencv  is  to  reduce  the  revenues  coming  from  this  source.     The 
practice  is  to  exempt  more  and  more  those  commodities  (of  neces- 
sity) consumed  by  the  poorer  classes.     Up  to  1901  the  Octroi 
yielded  annually  over  50%  of  the  entire  city  revenues  of  Paris. 
And  though  greatly  reduced  since  that  year  it  is  still  the  chief 
source  of  taxation. 

Among  the  Indirect  Taxes  attention  is  called  to  the  lucrative- 
ness  of  the  municipal  gas  and  water  works. 

National  Grants  are  not  so  important  in  Parisian  as  in  London 
system  of  taxation. 

The  percentages  given  are  based  on  returns  of  the  last  few 
years  and  should  be  compared  with  tables  showing  percentages 
preznous  to  1900.     (See  Table  II.) 

I.— Direct  Tax:  "  Centimes  additionnels."  This  includes 
a  tax  on: 
(i)  Land  and  buildings  (contribution  fonciere); 

(2)  Personal  property  tax  and  poll  tax  (contribu- 

tion personnelle) ; 

(3)  Door  and  window  tax; 

(4)  Business  tax,  on  various  trades  and  profes- 

sions; 

(5)  A  special  dog  tax  is  also  levied. 


35 

This  direct  tax  (which  corresponds  to  the  London  rates  and 
to  our  own  general  property  tax)  yields  only  about  2^%  of 
total  revenue. 

II. — Octroi:  This  tax,  although  an  indirect  tax  on  com- 
modities, is  set  off  by  itself  in  this  classification 
because  of  its  importance  and  uniqueness.    From 
1901  to  1903  it  yielded  about  36%  annually  of 
0       entire  city  revenues  from  taxation.. 

III. — Indirect  Tax:  This  tax  includes  those  revenues  that 
come  from: 
(i)  Municipal  works,  like  water  and  gas; 

(2)  Fees  and  licenses  from  public  carriages, 
market  dues,  public  weights,  cleaning 
and  sweeping,  etc. 

About  31%  of  entire  local  revenues  come  from  indirect  taxa- 


tion. 


IV. — National  Grants:  For  support  of  Paris  iwHce  and 
Paris  roads  and  education.  The  national  gov- 
ernment contributes  into  the  Paris  fund  5%. 

Paris  Rci'enues. 

A  study  of  the  tables  shows: 

(i)  That  the  indirect  taxes  (that  is,  the  Octroi  and  the 
receipts  from  market  fees,  dues,  gas  works,  eic.i 
amount  to  about  67%  of  total  receipts  since 
1901.  In  the  ten  years  previous  to  190 1  these 
same  indirect  taxes  yielded  about  75%. 

(2)  Since  1901  the  revenues  from  the  Octroi  have  fallen 

considerably,  as  designed  by  law.  The  aim  of 
legislation  is  gradually  to  do  away  with  the 
burdensome  aspects  of  the  Octroi. 

(3)  The  tendency  is  to  shift  part  of  this  Octroi  burden  over 

to  the  direct  tax — the  '*  centimes  additionnels.*' 


37 


36 

Budgets  of  Paris. 

Sho',vwg  Receipts  for  igoi-iSP^'W- 
,         •         ,nni   there  has  been  a  falling  off  in  the 

"""'''       1  ::ZZ  TZL  tax  (centime,  additionnels) . 
Octroi  tax  and  an  increase  m  ui 


(Table  I.) 


*«  Centimes     Addiiionnels  "— Di- 

TectTax :■■•."   V'^,. 

♦♦  Octroi "  (reduction  s-mce  Laws 
of  1807-1902) :  •    - 

JnJirecl  Local  :  Including  ma. ket 
dues,  public  carnage  fees  re- 
ceipts  from  gas  and  water, 
licenses,  etc. •  • I* ' ' ' - 

Imperial  grants  for  police  expense 
and  lor  public  roads 

Total  (ordinary  receipts  in-l 
eluding -'interest'  on  ! 
funds  and  unforeseen  , 
laxes) J 


Francs. 
73.C9O'40O 

115,285,400 

95,069.797 
16,814,187 

310,950.7  «6 


Francs. 
75.341.  »oo 

115,260,000 
98,059,205 

17,028.435 


Fiancs. 
79.316.3co 

109,75 1'700 

102.003,515 

16,947.935 


AVKRAGB 

Per- 
centage 

FOR  3 

Years, 


235^ 
36^ 


3i5t 
o55< 


3i3.557.7'3        3i6.5i4.253         ^^ 


A 


dual  Receipts  for  Fhe   Years,  from  Chief  Sources— (i2o3-^^J7) 

(Table  II.) 


Source. 


Total. 


"Octroi" 

Direct  Property  1 
Tax— "Centimes  V 
Additionnels"  . .  ) 

Watt-r  Works 

(ias  Works  (paid  to  i 
City  by    Private  V 


1893- 


f.  c. 

281,682,798  25 


Companies. 

ational 

(into  Police  Funt 


National         Grant  j 
,d)f 


Market  Fees,  etc 

Income  —  Interest  \ 
on  Public  Fund,  f 

Public  Carriage  I 
License  Fees  . . .  f 

National  Contribu-  1 
lion  (into  Pave-  > 
mem  Fund)  . . . .  ) 


151.079.452  43 
32,812,642  16 

15.389.316  48 
14,237,022  84 

10,489,950  OD 
8,596,449  29 
6,048,960  88 
5.874,585  61 

3,400,000  CO 


1894. 


f.  c. 

282,005,870  23 


150,206,242 

33,560,842 

15.513.907 
13,648,043 

10,489,950 
8,197,152 
6,067,344 
5,9:0,610 


1895. 


I.     c. 

293  576.507  51 


1896. 


1897. 


Sf  ■  >  • 


f.     c.     f.     c. 

297,230,034  59  301,306,388  58 


14  156,165,897  08 

03  33.991.969  36 
67  16,443,213  20 
52  14,263.205  10 

OD   11,061,252  28 

85  i  8,010,567  c8 

I 

44   6,164,364  01 


28 


5.975.842  36 


3,400,000  00  ;  5,400,000  00 


•55.894.387  91  ,156.965426  72 
34.443.860  67  34,793.451  85 
16,947,500  67  17,846,029  73 
14,470,187  38  13.211.376  10 

11,101,307  38  .  11,619,120  05 

I 

8,528,865  18   9.238,793  32  I 
6,314.785  72  I  6,333,042  23 


6,608,658  45 


6,75».709  16 


3,400,000  00  \    3,400,000  00 


.529 
.116 

.056 

.048 

037 
.029 
.021 
.022 

.011 


I 


Public  Weights,  1%.        Slaughter-house  fees,  t%.         License  on  public  way,  1%. 


A^sessme  Us  fiT  cleanins  stree'.s,  art- 


lii 

I'  • 

III 


38 

(Table  111.) 


Nati'RK  des  Recettes. 


CONSTATBKS    AV 
COMPTE   DE    1898. 


Kecettcs  ordinaires :  operations  propres  k 
I'exercice  des  fonds  g^neraux  : 

Centimes  communaux,  imposition  speciales  | 
et  taxe  sur  les  chiens •  •  ) 

I'art  rtvenant  a  la  Ville  dans  le  produit  des  i 
diverses  amendes  et  des  permis  de  J 
chasse * 

Octroi 


CONSTATiES  AU 

CoMn-B  DE  1899. 


Droits  d'expedition  d'actes  et  prix  de  vente  ) 
d'objets  mobiliers > 


jbjets 
Hallcs  et  Marches, 


Puids  public 

Abattoirs • 

Ei»trep6ts • 

Troduits  des  propri^tes  communales 

Taxes  funeraires 

Concessions  de  terrains  dans  les  cimetidres. . . 

Lfgs    et    donations  pour    des  oeuvres  de ) 
bienfaisance ) 


Locations  sur  la  voie  publique 

Voitures  publiques 

Droits  de  voiiie 

Vente  de  materiaux  de  la  voie  publique 


Ci>ntributions  pour  travaux  de  voirie 

Contribution  de  Tetat  dans  ks  Jrais  d'en- 
treiien  et  de  nettoiement  du  pave  de 
Paris 

Taxe  du  balayage  (sweeping) 

Kedcvances  diverses  payees  pr  la  com-  | 
pagnie  parisienne  d'6clairage  et  de  V 
chauffage  par  le  gaz ) 

Abonnement  aux  eaux  de  la  ville 

Donations— Recettes   d'enseigneroent  pub-  | 

lique ) 

Exploitation  des  voiries— Vidanges-egouts . ... 

Contribution  de  I'etat  de  la  police 

Recettes  diverses  et  imprevues . . 

Produit  de  Tanterieur  budget 


fr.    c. 
35,204,136  40 

6,926,738  47 
156,607.156  29 

295.233  32 

9»  197.849  78 

355,901  80 

3.955.863  03 
2,514-714  37 
1,949.909  34 

912,954  64 
2,518,438  40 
51.405  37 
4,435.818  13 
6,988,659  37 
1,294,630  46 

366,952  56 

4,965,458  30 

3,400,000  30 

3,107,241  77 

13,142,581  94 

19,040,683  70 

4,379.730  63 

4.057,343  73 
11,624,053  42 

1,846,75 »  99 
1,348,467  79 


Con-tat EES  av 

COMrTE   D,i    1900. 


Total  des  recettes  ordinaires  propres  k\ 
I'exercice  et  aux  exercices  anterieursj 


300,481,677  90 
317,665,428  63 


fr.     c. 
34,679,4' 3  09 

6,272,059  93 

161,991,130  03 

278,666  12 

9,238,100  88 

362,353  «o 
4,063,675  90 

2,105,659  32 
2,070,902  69 

969.647  30 
2,704,129  08 

57,313  23 
4,853,854  94 
7.266,893  53 
1,051,444  18 
526,594  08 
4,92i,oSi  46 
3,400,000  46 

3,548,998  79 
14,627,010  72 
20,450,227  69 

4,325,207  05 

4,213.258  94 

11,856,709  99 

2,223,310  13 

1,560,232  25 


309,617,875  32 
327.933.123  40 


fr.     c. 
35. '49,647  79 

6,667,267  84 
173,583.104  18 

279,771  28 
9»782»307  93 

409,352  93 
4.413.434  12 
1,837,116  09 
2,191,642  14 

978,186  31 

2.606.636  35 
59,512  20 

4.653.637  93 
8,748,110  02 

765,809  II 
285,401  96 

4.416,375  82 
3,400,000  82 
3,546,201  02 

15.671,433  54 

22,375,302  54 

4,423.076  75 

4,913,9"  07 

12,287,597  07 

4.391.444  60 

5.770,498  25 


333.6«2,752  65 
357,326.023  03 


39 


Berlin  Budget  for  1903. 

(Table  I.) 

Ordinary  Receipts  and  Expenditures. 


I. 


Sul'RCES. 


2. 


Total 


tJRrss 
Recbikis. 


Marks. 
138,212,587 


kXPEND:TURFS. 


Marks. 
133,166,096 


3.  City    Buildings,    (rents  paid  for  use  } 

of  city  houses  and  land) \ 

4.  Streets,   Parks,    Br  i  dges— Maince- / 

nance,  cleaning,  etc j 

5.  Sewerage,    Irrigation,    Fire    Depart-  ( 

ment,  e/c f 

6.  Public  Gas,  Water  Works 

7.  Market  Fees,  e/c 

8.  Public  Sanitation , 

9.  Education  and  Care  of  the  Poor 


10.  Public  Debts,  ^/r.— Interest  on  same. . 

11.  Private     Gas    and     Electric     Com- i 

panies — Fees,  etc j 

12.  Taxes     Proper — Income,     property,  I 

business,  trade,  dog  tax,  eU j 

13.  General  Administration — Police,  etc.. 


14.  Extraordinary. 


792,903 

i,743.6«9 

10,811,473 

37275,122 

8.215,808 

2,838,120 

4,788,943 
390,186 

4.763,965 
64,070,664 

2,413.774 
23,036,455 


160,865 

9,165,681 

7,220,883 

23,189,138 

5.404.397 

9,761,411 

37,386,090 

19,198,179 

30o,93« 

1,634,625 

16,860,177 

28,238,698 


•  Ster 
Indicates 
Net  Profit 

Income. 


* 


* 


The  figures  of  the  "  extraordinary  sources  "  are  not  included 
in  the  column  above  marked  "  Total." 

As  the  above  is  only  the  estimated  Budget,  it  does  not  include 
the  running  or  current  unforeseen  items. 

Analysis  of  Receipts  of  1903  (Based  on  Table  /.). 
The  "  taxes  proper,"  or  *'  Steuereinziehung,'  'in   1903,  were 
distributed  as  follows  (see  No.  12  in  Table  I.)  : 

RECEIPTS   FOR    I903. 

(Table  II.) 


Total 

62,030,926  marks. 

"  Grundsteuer,"  Real  Estate  Tax 

21,214,710  marks. 
8,055,818        " 
28,316,365 

3,438,923        " 

Business  Tax 

Income  Tax 

Dog  Tax,  Transfer  Tax  and  Trade  Tax 

The  "  Gemeindegrundsteuer,"  or  direct  real  estate  tax,  yields 
only  about  15  per  cent,  of  "total"  city  revenues,  whereas  the 
income  tax  yields  about  20  per  cent. 


i 


I  r, 


I 


40 

Analysis  of  ^'^zBud.CisMl-y 
:„>„,  ra.v..-n  we  include  in  this  merely  the 

(a)  Income  tax; 
0/  (h)  Business  tax; 

„,„  ,»„ ..-  u»  .'•« -g'srtc. ».. 

As  total  city  revenues  are  I3MI2.5»7 

yield  about  34%  "f  «'»'•  .  ^  „ext  comes 

Oi  this  3470  the  income  ^/f  f  *;j:Li„ess  tax," 
the  "  Gntndsteuer,"  and  finally  the 

"  "^;  Vrteipu  (in  percentages)  throw  no  light 
InMrcc,  Ta..cs-G.o.s  -«'P^^     ^  ^^  ^.^^  ,he  net  surpluses 
on  taxation.    I  ,  howev    '  ^^^  ^.^^.^^^^^ 

and  add  them  together  the  ngu 

Indirect  taxes:  ^^  ^^^^^^sBS. 

(Table  HI) 

632,028  Marks. 

City  Property 3,580,590 

Canals.  Irrigation.  Scvreragc,  etc •••—         ^^^^^^^^       .. 

Public  Gas  Works 4,318,170       " 

r--.  Works  and  Electricity ,, 

Private  Gas  WorKs  anu  2,744,1*3 

Market  Fees,  etc "^^^1^ ———"I' 

______ "~  i      17,803,201  Marks. 

Total ••^'_|_^_^_^_^^J^ == 

avenues  collected  Cj^-^'^-SS?  marks).  _      , 

.        ^   ^Tmailed  Analysis  ani  ClassW- 

- ..-  --tLrrrr:;:;-:  (see 

the  total  gross  receipts,  but  on  n 

Table  IV.)- 

---  'a:..o..  r.r:   Graduated.     V^^as   mo.J-n  ^ 

":r  t!x  Ist  always  be  levied  on 
37.c,r.  in  '899-'9°o-        '-;"  ^.^  ^^  ^,,  p^.^ian  State  income 

tax. 


41 

IL— Business  Tax:  Utilized  since  1895  to  take  the  place 

of  rental  tax.     Businesses  are  classified 
112%  and  taxed  accordingly  on  basis  of  cap- 

ital, or  amount  of  business,  or  profits. 

Ill,— Real  Estate  Tax.  "  Gemeindegrundsteuer."     This  in- 
cludes a  tax  on  both  land  values  and 
24.8%  building  values. 


Total,  74%  from  direct  sources. 


Inpirect  revenues: 

I.— National   Grants:  "Dotations."     These  are  grants 

given  by  the  State  to  Berlin  (and  other 
1.4%  in  1899-1900.  localities)  for  general  aid.     Since   1895 

these  have  been  insignificant. 

ll.^Mnnicipal  Enterprises:  Quasi-business  undertakings, 

such  as: 

(a)  City  property  for  city  use  and 

10.1%  in  1899-1900.  rentals; 

(b)  Gas  works. 

III.— F^^.f,  Dues,  Special  Assessments:  These  come  from: 

(a)  Market  dues,  inspection  fees,  mar- 
ket licenses; 
9.3%  in  1899-1900.  (b)  Fees  and  bonus  from  waterworks, 

sewerage,  docks,  etc.; 
(c)  Betterment  rates. 

1-  IV.— Special  License:  This  includes  the  "  Betriebsteuer," 

[license  fee  for  trading] ,  and  "  Hund- 
steuer  "  or  dog  tax.  The  former  is  very 
insignificant;  the  latter  yields  an  appre- 

5.1%  in  1899-1900.  ciable  sum.     Taken  together,  they  are 

a  relief  to  taxation,  since  the  income  is 
net 


Total,  25.9%  from  all  indirect  sources  (see  Table  V.). 


11 


4? 

Berlin  Receipts  for  1897-1899. 
(Table   IV.) 


^ 

ii: 1, 

1897. 

% 

1898. 

= — rt-- 

1899. 

% 

Marks. 

Marks. 

Marks. 

Total 

63,720,820 

100 

66,680,083 

100 

72,074,051 

too 

National  Grants— 
"  Dotaiionen  "... 

1,334,070 

2.3 

752,620 

I.I 

1 
1,043-346 

1.4 

Municipal  Works, 
Gas— City  property  ) 

5,602,002 

8.8 

5,705,530 

8.6 

7,254,150 

10. 1 

Fees,   Dues,  etc.— 

"Gebtthren    u.    ■ 

5.783,273 

9-1 

6,079,880 

9  I 

6,759,681 

9.3 

Beitrftge  " 

Special   Licenses   on" 
Trade  and  Dogs — 

|( 

"Beitriebsteuer"  V 

3,272,080 

5.< 

3,387.289 

51 

3,707,120 

\     5.1 

u  n  d      **  Indirekte 

Steuern" 

^ 

Income  T  a  x — "  Ge- 

m  e  i  n  d  e  •  einkom-  • 

23,958,565 

37-6 

25,988,767 

38.8 

27,297,888 

37-9 

mensteuer  " 

Business   Tax— "  Ge- 
werbesteuer" 

6,967,181 

10.9 

7,599,445 

II. 4 

8,128,408 

I  II.3 

Real     Estate    Tax— 
•«  Grandsteaer  " . . . 

16,803,649 

26.4 

17,168,552 

25.7 

17,883.462 

24.8 

1 

Note— These  tables  do  not  contain  the  gross  receipts— they  are  rather  the  net  tax  revenues. 

Direct  versus  Indirect  Taxes. 
If  we  include  in  the  direct  taxes  these  three  sources: 
(i)  Income  tax; 

(2)  Business  tax; 

(3)  Real  Estate  tax; 

— and  if  we  include  under  the  indirect  taxes  the  following: 
(i)  City  property ; 

(2)  Fees,  dues,  assessments; 

(3)  Business  enterprises,  like  gas  works; 

(4)  Dog  tax,  etc. 

We  obtain  the  following  receipts  and  proportions: 

(Table  V.) 


1897. 

% 

1898. 

^ 

1899 

Marks. 
72,074,051 

^ 

Total* 

Marks. 
63,720,820 

100 

Marks. 
66,680,083 

100 

76.1 
23  9 

100 

Direct  ta.xes 

47,729,395 
15.991.425 

74.9 
25.1 

50,756,764 
I5.9-'3.3I9 

53.309,755* 
18,764,293 

74- 

Indirect  taxes  . .    .... 

26. 

*  The  only  itein  not  accounted  for  is  the  small  sum   received   from  the  State,   known  as 
dotations. 


43 
Direct  Taxes,  from  1897-1900. 
The  direct  taxes,  as  we  have  seen,  yield  about  75  per  cent,  of 
the  entire  city  revenue.     This  direct  tax  comes  from  three  sources 
in  the  following  proportions  and  amounts : 

DIRECT  TAX. 

(Table  VI.) 


1897. 

^ 

1898. 

lOO 

1899. 

% 

Total 

Marks. 
47,729,395 

100 

50,756,764 

53,309,758 

100 

Income  tax. . . 

23,958,565 

16,803,649 

6,967,181 

50.19 
35.78 
14.59 

25,988,767   I  51.22 
17,168,552    1  34.22 

27.297,888 
17,883,462 
8,128,408 

Real  Estate  tax 

Business  tax.. 

51.22 
33-55 

7,599,445 

14.90 

»5-23 

The  income  tax  and  the  business  tax  are  the  two  lucrative 
sources   for   Berlin.     These   sources   are   only   partly   used   by 
London  and  Paris  and  not  at  all  by  New  York  City. 
Concluding  summary  of  Berlin  taxation : 

I.—The  Real  Estate  Tax  (Grundsteuer)  is  only  of 
secondary  importance  in  Berlin  receipts.  This 
tax  yields  annually,  as  we  saw  above  (Tables  I. 
and  II.),  only  about  15%  of  total  gross  receipts. 
Compare  this  with  the  72%  which  Rates  yield  in 
London. 

II.— The  Income  Tax:  This  is  of  unique  importance  as 
compared  with  the  other  items  in  the  Berlin 
budget,  as  well  as  ip  the  Parisian  and  London 
budgets.  In  1903  the  income  tax  yielded  about 
20%  of  total  gross  Beriin  receipts  and  about 
377c  of  net  receipts  (see  Tables  I.  and  II.,  also 
Table  IV.). 

in.— The  Business  Tax:  This,  too,  is  of  considerable  im- 
portance in  Berlin  budget  (see  Table  VI.). 

IV. —Municipal  Works  yield  a  large  net  income  (see 
Table  IV.). 

V.^National  Grants  are  of  no  importance. 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance, 


APPOINTED   BY 

The  Mayor  of  The  City  of  New  York, 

1905. 


COMMITTEE   ON 
TAXATION   AND    REVENUE 


REPORT 


OF 


TJ 


ON 


THE  PERSONAL  PROPERTY  TAX 


Submitted  at  Meeting  of  June  6,  190?. 


New  York: 
MARTIN  B.   BROWN   COMPANY,   PRINTERS   AND   STATIONERS, 

Nos.  49  TO  57   Park  Place. 

1905.  «' 


ADVISORY    COMMISSION 


ON 


Taxation  and  Finance, 


Chairman, 
Edgar  J.  Levey. 


Committee  on  Taxation  and  Revenue. 


Edwin  R.  A.  Seligman, 
Lawson  Purdy, 
Francis  Lynde  Stetson, 


Frank  A.  O'Donnel, 
Alonzo  Bell, 
Morris  K.  Jesup. 


Committee  on  the  City  Debt  and  Special  Assessments. 

Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  John  J.  Delany, 

Fr.\NK  J.  GOODNOW. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  Jo„x  Crane, 

John  C.  Hertle. 


i 


REPORT  OF  LAWSON  PURDY 


ON 


The  personal  property  Tax. 


Committee  on  Taxation  and  Revenue: 

Gentlemen — In  accordance  with  your  request  I  submit  the 
following  report  upon  two  questions.  First:  Is  it  desirable  to 
strengthen  the  provisions  of  the  law  for  the  collection  of  taxes 
upon  the  personal  property  of  non-residents,  and  to  subject  to 
taxation  additional  personal  property  of  non-residents  ?  Second : 
Should  the  provisions  with  reference  to  the  deduction  of  debts 
from  personal  assets  be  so  changed  that  debts  may  only  be  de- 
ducted from  credits? 

The  literature  upon  the  subject  of  the  gteneral  property  tax 
as  applied  to  the  taxation  of  personal  property  is  so  voluminous 
that  it  seems  unnecessary  to  add  to  it  by  any  lengthy  discussion 
of  the  subject  as  an  original  contribution.  Tax  Commissions 
have  been  appointed  in  many  of  the  States  to  consider  questions 
of  this  character,  and  numerous  books  and  pamphlets  have  been 
written  by  students  of  the  subject,  which  have  added  greatly  to 
our  general  knowledge.  The  brief  report  which  follows  is  made 
up  almost  entirely  from  quotations  from  these  various  treatises 
and  reports.  In  presenting  evidence  with  regard  to  the  expe- 
diency of  making  any  change  in  the  law  with  reference  to  the 
deduction  of  debts,  I  have  selected  those  States  in  which  it  is  not 
permitted  to  deduct  debts  from  personal  assets  other  than  credits. 

The  general  property  tax  as  applied  to  the  taxation  of  personal 
property  is  so  thoroughly  discredited  that  any  attempt  to  make  it 
more  effective  can  only  serve  to  delay  its  inevitable  downfall. 
The  greatest  difficulty  in  securing  the  repeal  of  any  law  imposing 
a  tax  is  to  be  found  in  the  amount  of  revenue  which  the  tax  pro- 


duces.  The  smaller  the  revenue  the  easier  it  is  to  repeal  the  law. 
It  is  plain  that  our  law  might  be  changed  so  as  to  produce  a  larger 
revenue  for  a  time,  but  in  the  light  of  all  experience  it  seems  that 
this  would  only  increase  the  injustice  of  the  law  and  render  its 
repeal  more  difficult. 


History  of  the  General  Property  Tax. 

*  "  Historically,  the  property  tax  was  once  well-nigh  universal. 
Far  from  being  an  original  idea  which  the  American  instinctively 
adopted,  it  is  found  in  all  early  societies  whose  economic  con- 
ditions were  similar  to  those  of  the  American  colonies.  It  was 
the  first  crude  attempt  to  attain  a  semblance  of  equity,  and  it  at 
first  roughly  responded  to  the  demands  of  democratic  justice. 
In  a  community  mainly  agricultural,  the  property  tax  was  not 
unsuited  to  the  social  conditions.  But  as  soon  as  commercial 
and  industrial  considerations  came  to  the  foreground  in  national 
or  municipal  life,  the  property  tax  decayed,  became  a  shadow  of 
its  former  self  and  ultimately  turned  into  a  tax  on  real  property, 
while  professing  to  be  a  tax  on  all  property.  The  disparity 
between  facts  and  appearance,  between  practice  and  theory,  every- 
where became  so  evident  and  engendered  such  misery  that  the 
property  tax  was  gradually  relegated  to  a  subordinate  position 
in  the  fiscal  system  and  was  at  last  completely  abolished.  All 
attempts  to  stem  the  current  and  to  prolong  the  tax  by  a  more 
stringent  administration  had  no  effect  but  that  of  injurious  reac- 
tion on  the  morale  of  the  community.  America  is,  to-day,  the 
only  great  nation  deaf  to  the  warnings  of  history.  But  it  is  fast 
nearing  the  stage  when  it,  too,  will  have  to  submit  to  the  in- 
evitable." 

Mr.  David  A.  Wells  thus  sums  up  the  experience  of  other 
countries : 

*  "Origin  and  History  of  the  General  Property  Tas — The  idea 
that  in  order  to  tax  equitably  it  is  necessary  to  assess  everything 
capable  of  resulting  in  the  obtaining  of  revenue  is  not  original 
with  the  American  people.     Its  inception  dates  back  to  the  dawn 


¥ 

i 


*  The  General  Property  Tax,  pp.  60  and  61,  Edwin   R.   A.   Seligman,    1890,     Also 
in  his  Essays  in  Taxation. 

*  Theory  and  Practice  of  Taxation,  pp.  432-437,  David  A.  Wells,   1900. 


of  civilization,  and  its  development  may  be  regarded  as  in  the 
nature  of  an  economic  evolution.  In  the  incipient  stages  of 
society,  as  already  pointed  out,  property  consisted  exclusively  of 
things  tangible  and  visible — lands,  buildings,  cattle,  slaves,  agri- 
cultural products,  household  effects  and  implements — and  what 
was  exacted  by  rulers  or  chiefs  of  their  subjects  was  arbitrary 
proportions  of  such  kinds  of  property  or  of  personal  service,  and 
was  not  in  any  proper  sense  taxation,  but  tribute.  For  thousands 
of  years  there  were  no  credits  or  material  evidences  of  indebted- 
ness, as  there  are  none  at  the  present  time  among  barbarians  or 
half-civilized  people ;  for  a  knowledge  of  letters,  of  the  art  of  writ- 
ing, and  a  somewhat  durable  and  portable  material  to  w  rite  upon 
were  essential  prerequisites  for  their  existence,  the  earliest  evi- 
dence of  the  recognition  of  anything  like  a  mortgage  being  the 
inscription  on  certain  clay  tablets  excavated  from  the  ruins  of 
the  ancient  cities  of  Babylon  and  Assyria,  which  were  evidently 
the  highest  results  of  long  and  slowly  developing  civilization. 
In  fact,  in  the  early  stages  of  society  there  was  no  important  form 
of  capital  other  than  landed  property  and  the  instrumentalities, 
including  slaves,  for  its  cultivation,  and  so  far  as  the  system  for 
obtaining  revenue  for  the  rulers  of  state  merited  the  name  of 
taxation,  it  was  practically  a  '  land '  tax. 

"As  civilization  advanced  slavery  gradually  broke  down ; 
trade  or  traffic  between  individuals  or  adjacent  communities  ex- 
tended and  became  commerce ;  free  labor  appeared ;  capital  de- 
veloped and  multiplied  the  forms  of  visible,  tangible  property. 
Then  the  system  of  obtaining  revenue  began  to  have  the  charac- 
teristics of  a  general  property  tax;  and  as  the  coincidence  of 
great  value  with  small  bulk  in  some  forms  of  tangible,  visible 
property  favored  concealment,  some  methods  of  obtaining  revenue 
from  property  other  than  mere  inspection  became  necessary,  and 
were  obtained  by  the  Romans  in  the  latter  days  of  their  empire 
by  endowing  their  assessors  and  taxgatherers  (as  before  shown) 
with  the  power  to  administer  torture  to  unwilling  taxpayers,  a 
method  that  was  followed  and  perpetuated  until  within  a  very 
recent  period  by  the  rulers  of  most  Asiatic  countries ;  and  in  later 
tiays,  when  credits  came  into  existence  and  extensive  use.  and 
titles  to  property  and  evidences  of  indebtedness  were  regarded 


as  property,  although  intangible  and  invisible,  a  method  of  dis- 
covering and  assessing  the  same,  as  approximate  to  actual  torture 

as  a  higher  civilization  would  sanction,  was  everywhere  adopted. 
♦  ♦♦♦*♦* 

"After  the  dissolution  of  the  Roman  Empire  and  the  subse- 
quent reconstruction,  as  it  were,  of  government  and  society  in 
Europe  during  the  early  feudal  period^  and  when  land  was  prac- 
tically the  only  form  of  wealth,  the  payments  exacted  for  the 
support  of  the  governing  powers — kings,  barons,  knights,  etc. — 
were  essentially  and  almost  exclusively  in  the  nature  of  land 
taxes ;  and  the  terms  'danegeld,'  a  charge  on  lands  at  so  much  per 
hide,  or  an  area  of  about  one  hundred  acres ;  '  sciitage,'  a  charge 
on  tenants  in  lieu  of  military  service ;  '  carucage,'  a  charge  on 
'  plough  lands  ' ;  '  tallage  '  ( from  the  French  tailler,  to  cut  off) , 
a  charge  on  the  tenants  of  royal  manors,  and  the  like  were  desig- 
nations of  the  different  forms  of  such  assessments  at  different 
periods.  As  civilization  advanced  and  was  accompanied,  as  at  a 
more  primitive  period,  with  an  increase  in  the  forms  of  personal 
property,  a  combination  of  taxes  on  land  and  movables,  or  a  gen- 
eral property  tax  system,  developed  and  was  adopted  by  all  the 
nations  of  western  Europe  with  all  the  despotic  adjuncts  which 
seemed  necessary  to  make  its  enforcement  successful.  The  ulti- 
mate result  of  such  a  system  was  what  might  have  been  anticipated. 
From  a  very  early  period  it  occasioned  great  popular  dissatisfac- 
tion. In  Milan,  Italy,  as  early  as  1208,  it  was  enforced  with  such 
severity  '  that  the  assessment  book  was  known  as  the  libra  del 
dolore.'  In  Florence  it  became  so  honeycombed  with  abuses  and 
the  load  of  taxation  fell  with  such  crushing  force  on  the  small 
owners  of  property  that  imminent  popular  revolution  and  disorder 
compelled  its  essential  modification.  As  wealth  increased,  eva- 
sions of  the  tax  increased  in  a  greater  proportion  in  every  com- 
munity, leaving  the  burden  of  the  system,  as  now  in  the  United 
States,  on  that  class  of  the  population — mainly  agricultural — 
that  are  least  able  to  bear  it.  Sir  Robert  Cecil  stated  in  1592 
that  there  were  not  five  men  in  London  assessed  on  their  goods 
at  two  hundred  pounds  (one  thousand  dollars)  ;  and  Sir  Walter 
Raleigh  stated  in  1601  that  '  the  poor  man  '  (in  England)  *  pays 
as  much  as  the  rich.'    In  Florence  in  1495  only  fifty-two  persons 


paid  the  tax  on  trade  capital,  although  the  amount  of  such  capital 
must  have  been  immense.  Alarslial  V'auban,  of  France,  wlio  wrote 
on  taxation  about  1700,  stated  that  the  taille  personelle  was 
assessed  only  on  the  poorest  classes.  The  result  has  been  that 
as  the  difficulty  of  assessing  visible  personal  property  and  the 
impossibility  of  reaching  invisible  and  intangible  personalty  be- 
came apparent,  the  tax  was  gradually  modified,  and  finally  abol- 
ished in  all  European  countries,  except,  possibly,  Switzerland  and 
Holland,  where  its  nature  has  very  little  of  its  original  and  typical 
character.  One  of  the  first  acts  of  the  French  National  Assem- 
bly in  1789  was  to  abolish  it  entirely.  [In  England]  a  provision 
for  taxing  personal  property  under  a  nominal  land  tax  continued 
to  exist  on  the  statute  book  until  1833,  when,  through  constant 
exemptions  and  systematic  evasions,  the  annual  revenue  accruing 
from  the  same  had  run  down  to  the  sum  of  eight  hundred  and 
twenty-three  pounds  (four  thousand  one  hundred  and  fifteen  dol- 
lars). It  is  also  interesting  to  note  that  the  people  of  Europe 
have  been  so  long  exempted  from  a  general  property  tax  that  their 
leading  writers  on  economic  or  fiscal  subjects  rarely  discuss  it  or 
even  seem  to  have  any  knowledge  of  its  characteristics  or  historical 
experience." 

"The  Use  and  Value  of  Oaths  as  an  Adjunct  of  Taxation. — 
Consideration  is  properly  asked  in  this  connection  to  the  use  and 
value  of  oaths,  an  increase  in  the  number  and  stringency  of  which 
is  often  regarded  as  essential  to  effective  and  equal  taxation.  It 
is  the  all  but  unanimous  opinion  of  officials  who  of  late  have 
had  extensive  experience  in  the  administration  of  both  the  national 
and  State  revenue  laws  that  oaths,  as  a  matter  of  restraint  or 
as  a  guarantee  of  truth  in  respect  to  official  statements,  have  in  a 
great  measure  ceased  to  be  effectual;  or,  in  other  words,  that 
perjury,  direct  or  constructive,  has  become  so  common  as  to  almost 
cease  to  occasion  notice.  In  fact,  there  has  come  to  be  a  feeling 
in  the  community  that  an  oath  in  respect  to  matters  in  which  the 
Government  is  a  party  is  a  mere  matter  of  form,  of  mechanical 
procedure,  and  that  its  violation,  especially  with  a  mental  reserva- 
tion, and  when  the  interest  of  other  individuals  is  not  specifically 
affected,  does  not  in  itself  constitute  a  crime.  The  fact  that  the 
assessors  of  almost  every  State  every  year  make  oath  that  they" 


8 


have  valued  all  property  at  its  actual  value,  when  they  know  they 
have  not,  constitutes  one  proof  of  the  truth  of  this  assertion. 
The  everyday  entry  of  goods  at  the  custom-house  at  undervalua- 
tion constitutes  another ;  the  enormous  frauds  committed  in  recent 
years  under  the  internal  revenue  laws  of  the  United  States,  which 
in  the  case  of  distilled  spirits  entailed  a  loss  in  a  single  year  of 
over  $130,000,000,  and  in  which  the  taking  of  false  oaths  was  at 
every  step  an  essential  feature,  constitutes  a  third;  while  of  in- 
dividual examples,  which  every  assessor  of  experience  can  detail, 
the  record  would  be  almost  interminable. 

"During  the  past  few  years  the  low  tone  of  commercial 
morality  in  the  United  States  has  been  a  fact  generally  recognized 
and  much  commented  upon;  but  it  has  not,  that  we  are  aware, 
been  made  a  subject  of  inquiry  by  those  to  whom  the  guardian- 
ship of  public  morals  is  particularly  intrusted.  How  far  the  ex- 
isting system  of  laws  relating  to  taxation — national  and  State — 
are  justly  chargeable  with  the  results  to  which  reference  has  been 
made,  or  how  much  in  the  division  of  responsibility  is  to  be  set 
down  to  the  account  of  those  who  violate  the  law,  and  how  much 
to  those,  who,  forewarned  of  the  weakness  of  human  nature  de- 
liberately make  laws  which  especially  lead  men  into  temptation, 
are  yet  unsettled  questions. 

"A  point  of  great  interest  and  importance  in  this  connection, 
though  often  overlooked,  is  that  even  if  all  the  States  of  the 
Federal  Union  should  entirely  exempt  personal  property  within 
their  territory  and  jurisdiction  from  taxation,  it  would,  never- 
theless, owing  to  the  dual  nature  of  the  Government  of  the  United 
States,  be  subject  to  a  large  measure  of  heavy  and  dispropor- 
tionate taxation.  Thus,  the  expenditure  of  the  Federal  Govern- 
ment, which  represents  taxation,  was  in  1896,  including  the  cost 
of  revenue  collection,  in  excess  of  $445,000,000,  not  one  cent  of 
which  was  derived  from  taxes  on  real  estate.  The  aggregate  of 
annual  taxation  by  States,  counties,  cities,  municipalities,  and  the 
District  of  Columbia  for  the  same  year,  is  estimated  by  reputable 
authorities  to  have  been  about  $400,000,000,  of  which  at  least 
one-fifth  was  assessed  or  was  collected  from  personal  property. 
If  real  estate  paid  all  the  State  taxes,  personal  property,  there- 
fore, would  still  be  paying  all  the  United   States  Government 


taxes,  or  a  large  excess  of  its  equitable  share  of  any  or  all  national 
taxation.  A  claim  that  any  personal  property  owner  is  justified 
in  protecting  himself  against  such  extortion  in  any  and  every 
legal  way  has  much,  therefore,  to  be  said  in  its  favor.  When 
such  protection  cannot  be  effected  legally,  he  has  only  to  leave 
the  State  for  others  that  are  not  extortionate  oppressors  of  capital. 
But  who  cannot  perceive  on  reflection  that  personal  property 
(capital)  must  be  largely  used  by  its  owners  and  at  fair  rates  at 
their  residence;  and  that  the  home  of  such  capital  will  show  the 
benefit  in  increased  local  business,  increased  population  and  in- 
creased value  of  real  estate  by  its  use?  Why,  then,  so  much 
overrighteous  talk  of  personal  property  owners  dodging  taxation  ? 
**  Logical  and  ingenious  as  have  been  the  arguments  in  opposi- 
tion to  the  legal  exemption  of  personal  property  from  taxation, 
the  citation  and  consideration  of  the  undisputed  experience  of  all 
countries,  people  and  ages  are  all  that  is  necessary  to  refute  and 
disprove  them.  There  was  a  time  when  nearly  all  men  believed 
and  taught  that  the  world  was  flat,  and  when  the  few  lisped  to 
the  contrary  exposed  themselves  to  a  charge  of  religious  heresy 
and  punishment.  But  a  comparatively  short  navigation  experi- 
ence effectually  put  an  end  to  all  controversy  on  this  subject ;  and 
it  is  doubtless  only  a  question  of  time  when  personal  property 
will  be  exempt  from  governmental  taxation,  because  no  system 
has  ever  been  devised,  or  is  likely  to  ^e.  which  will  enable  a  State 
to  tax  it  with. any  approach  to  uniformity  and  equity." 

Experience  of  American  States. 


OHIO. 

It  has  been  claimed  by  some  that  the  administrative  features 
of  the  law  in  certain  States  are  not  sufficiently  thorough  and 
severe,  and  for  that  reason  the  system  has  broken  down,  and 
not  because  the  system  is  wrong  in  itself.  This  reproach  cannot 
be  laid  against  the  law  in  Ohio.  The  Constitution  of  Ohio  pro- 
vides as  follows :  "  Section  2.  Laws  shall  be  passed  taxing  by  a 
uniform  rule  all  moneys,  credits,  investments  in  bonds,  stocks, 
joint-stock  companies  or  otherwise ;  and  also  all  real  and  personal 
property  according  to  its  true  value  in  money." 


10 


The  statutes  of  Ohio  require  that  blanks  containing  lists  of 
every  conceivable  kind  of  personal  property  shall  be  sent  to  every 
person  over  twenty-one  years  of  age,  who  must  answer  every 
question  relating  to  the  various  sorts  of  property  which  he  owns 
or  are  in  his  keeping,  and  he  must  do  this  under  oath  and  under 
pain  of  heavy  penalties.  In  order  that  the  inquisitorial  nature 
of  the  law  may  be  fully  understood  I  quote  Sections  2736  and 
2737  of  the  Ohio  statutes: 

'*  Sec.  2736.  Each  person  required  to  list  property  shall,  an- 
nually, upon  receiving  a  blank  for  that  purpose  from  the  assessor, 
or  within  ten  days  thereafter,  make  out  and  deliver  to  the  assessor 
a  statement,  verified  by  his  oath,  of  all  the  personal  property, 
moneys,  credits,  investments  in  bonds,  stocks,  joint-stock  com- 
panies, annuities  or  otherwise,  in  his  possession  or  under  his  con- 
trol on  the  day  preceding  the  second  Monday  of  April  of  that 
year,  which  he  is  required  to  list  for  taxation,  either  as  owner 
or  holder  thereof,  or  as  parent,  husband,  guardian,  trustee,  ex- 
ecutor, administrator,  receiver,  accounting  officer,  partner,  agent, 
factor  or  otherwise." 

"  Sec.  2737.  Such  statement  shall  truly  and  distinctly  set  forth, 
first,  the  number  of  horses,  and  the  value  thereof;  second,  the 
number  of  neat  cattle,  and  the  value  thereof;  third,  the  number 
of  mutes  and  asses,  and  the  value  thereof;  fourth,  the  number 
of  sheep,  and  the  value  thereof;  fifth,  the  number  of  hogs,  and 
the  value  thereof;  sixth,  the  number  of  pleasure  carriages  (of 
whatever  kind),  and  the  value  thereof;  seventh,  the  total  value 
of  all  articles  of  personal  property,  not  including  in  the  preceding 
of  succeeding  classes;  eighth,  the  number  of  watches,  and  the 
value  thereof;  ninth,  the  number  of  pianofortes,  and  the  value 
thereof;  tenth,  tlie  average  value  of  the  goods  and  merchandise 
which  such  person  is  required  to  list  as  a  merchant;  eleventh, 
the  value  of  the  property  which  such  a  person  is  required  to  list 
as  a  banker,  broker  or  stock  jobber;  twelfth,  the  average  value 
of  the  materials  and  manufactured  articles  which  such  person  is 
required  to  list  as  a  manufacturer;  thirteenth,  moneys  on  hand 
or  on  deposit  subject  to  order ;  fourteenth,  the  amount  hi  credits 
as  hereinbefore  defined;  fifteenth,  the  amount  of  all  moneys  in- 
vested in  bonds,  stocks,  joint-stock  companies,  annuities  or  other- 


it 


wise ;  sixteenth,  the  monthly  average  amount  or  value,  for  the 
time  he  held  or  controHed  the  same,  within  the  preceding  \*ear. 
of  all  moneys,  credits  or  otlier  effects,  within  that  time,  invested 
in,  or  converted  into,  bonds  or  other  securities  of  the  United 
States,  or  of  his  State,  not  taxed,  to  the  extent  he  may  hold  or 
control  such  bonds  or  securities  on  said  day  preceding  the  second 
Monday  of  April,  and  any  indebtedness  created  in  the  purchase 
of  such  bonds  or  securities  shall  not  be  deducted  from  the  credits 
under  the  fourteenth  item  of  this  section ;  but  the  person  making 
such  statement  may  exhibit  to  the  assessor  the  property  covered 

■ 

by  the  first  nine  items  of  this  section,  and  allow  the  assessor  to 
fix  the  value  theneof;  and  in  such  case  the  oath  of  the  person 
making  the  statement  shall  be  in  that  regard  only  that  he  has 
fully  exhibited  the  property  covered  in  said  nine  items." 

It  is  also  provided  that  any  person  required  to  list  property 
who  shall  claim  that  there  is  no  taxable  property  within  his 
control  which  he  owns  or  which  he  has  on  account  of  others, 
shall  be  required  to  make  oath  to  that  effect.  Persons  may  be 
summoned,  questioned  under  oath;  and  if  any  person  fails  to 
appear,  or,  appearing,  refuses  to  testify,  "  he  shall  be  subject  to 
like  proceeding  and  penalties  for  contempt  as  a  witness  in  actions 
pending  in  the  probate  court.  If  a  person  refuses  to  list  or 
swear  his  property  to  the  assessor,  the  auditor  shall  add  50% 
to  the  amount  returned  or  ascertained,  and  the  amount  thus 
increased  shall  be  the  basis  of  taxation." 

In  addition  to  these  provisions  of  the  statutes  there  is  what 
is  called  a  Tax  Inquisitor  Law,  which  gives  the  tounty  Com- 
missioners authority  to  make  a  contract  with  persons  who  may 
give  information  which  will  result  in  personal  property  being 
placed  on  the  assessment  roll.  In  Hamilton  and  Cuyahoga 
counties  such  informers  may  be  paid  25%  of  the  amount  col- 
lected, and  in  the  rest  of  the  State  20%  of  the  amount  collected. 
Debts  may  be  deducted  from  credits,  but  otherwise  there  is  no 
exemption  because  of  indebtedness. 

In  1893  a  Tax  Commission  was  appointed  by  Governor 
McKinley — two  Democrats  and  two  Republicans — to  investigate 
the  whole  subject  of  taxation.  In  its  report  the  Commission 
said:   *'  We  have  in  Ohio  the  most  efficient  and  minute  scheme 


12 


of  bringing  upon  the  duplicate  all  of  this  class  of  property  which 
has  been  devised  in  any  State."  After  describing  the  system, 
the  Commission  presents  numerous  illustrations  all  designed  to 
show  that  the  amount  of  personal  property  assessed  has  rather 
decreased  than  increased.  In  one  table  it  presents  the  nioncA'^ 
and  stocks  and  bonds  returned  for  taxation  in  the  different  city 
counties  of  Ohio  for  the  years  1881  and  1892 — that  is,  before 
and-  after  the  passage  of  the  Tax  Inquisitor  Law.  This  table 
shows  that  in  almost  every  case  less  money  was  assessed  in  1892 
than  in  1881,  and  less  stocks  and  bonds,  or  a  very  small  increased 
amount,  in  spite  of  the  fact  that  the  various  cities  were  increas- 
ing at  a  rapid  rate  in  population  and  wealth.  In  the  foot  note* 
I  present  this  table  as  made  by  the  Commission  of  1893  with 
the  corresponding  figures  for  1903.  In  Cincinnati  there  is  actu- 
ally less  money  and  less  in  stocks  and  bonds  assessed  in  1903 
than  in  1881. 

Summing  up  the  whole  matter  the  Commission  says:  "The 
system  as  it  is  actually  administered  results  in  debauching  the 
moral  sense.  It  is  a  school  of  perjury.  It  sends  large  amounts 
of  property  into  hiding.  It  drives  capital  in  large  quantities 
from  the  State.  Worst  of  all,  it  imposes  unjust  burdens  upon 
various  classes  in  the  community;  upon  the  farmer  in  the  country, 
all  of  whose  property  is  taxed  because  it  is  tangible;  upon  the 
man  who  is  scrupulously  honest,  and  upon  the  guardian  and 
executor  and  trustee,  whose  accounts  are  matters  of  public 
record." 

For  a  number  of  years  Ohio  has  endeavored  to  amend  the 
Constitution  so  as  to  make  a  reasonable  system  of  taxation  pos- 


,  STOCKS 

__                         _  MONEY.  AND  BONOS. 

Hamilton   County,    1881 $2,217,868  $2,135,878 

Hamilton    County,    1892 i,S8S.37S  2,256,223 

Hamilton    County.    1903 1,193.077  i.399.5i5 

Cuyahoga   County,    1881 1,402,322  1.836,654 

Cuyahoga   County,    1892 1,800,593  2,085,001 

Cuyahoga   County,    1903 2,385,016  1,823,240 

Lucas   County,    1881 174,946  SI.93S 

Lucas    County,    1892 253,087  176,644 

Lucas    County,    1903 558,804  218,360 

Franklin   County.    1881 1,513.965  594,897 

Franklin  County,    1892 1,094,448  897.080 

Franklin   County,    1903 1,324,590  408,082 

Montgomery    County,    1881 1,643,958  610,835 

Montgomery    County,    1892 i.354,S93  485-2S4 

.Montgomery    County,    1903 1,702.891  257,233 

State-at-large.    1881 40,642,949  8,637.850 

State-at-large.    1892 38,417.478  10.5s6.f56, 

State-ai-large,    1903 61,492,870  9.856,355 


13 

sible.  So  far  these  amendments  have  failed  because  it  is  neces- 
sary to  obtain  a  majority  of  all  the  votes  cast  at  an  election  to 
pass  an  amendment  to  the  Constitution.  In  1903  an  amendment 
was  adopted  by  the  Legislature  and  submitted  to  the  people. 
By  this  amendment  the  clause  for  the  equal  taxation  of  all  prop- 
erty was  stricken  out  and  the  following  language  substituted: 
"  The  General  Assembly  shall  provide  for  the  raising  of  all 
state  revenue  for  all  state  and  local  purposes  in  such  manner  as 
it  shall  deem  proper.  The  subjects  of  taxation  for  state  and  local 
purposes  shall  be  classified,  and  the  taxation  shall  be  uniform 
on  all  subjects  of  the  same  class,  and  shall  be  just  to  the  subject 
taxed." 

This  amendment  was  prepared  by  t^e  Ohio  State  Board  of 
Commerce  and  was  indorsed  by  the  Cincinnati  and  Cleveland 
Chambers  of  Commerce  and  by  21  other  organizations  through- 
out the  State.     The  Republican  platform  of  1903  declared: 

"  We  favor  removing  the  limitations  which  prevent  a  more 
just  system  of  taxation,  so  that  property  can  be  adequately  classi- 
fied for  taxation  purposes,  and  invite  the  most  careful  considera- 
tion of  the  amendment  for  that  purpose  to  be  voted  upon  at  the 
election  next  November." 

The  Democratic  party,  in  their  platform,  declared  as  follows: 

"  Taxation :  We  heartily  indorse  the  constitutional  amend- 
ment now  pending  before  the  people,  to  be  voted  upon  at  the 
coming  election." 

The  vote  upon  the  amendment  was  326,622  in  favor  and  43,562 
opposed.  The  amendment  failed  because  it  did  not  receive  a 
constitutional  majority  of  all  the  votes  cast  at  the  election.  The 
Ohio  State  Board  of  Commerce  declares  that  this  amendment  will 
be  submitted  to  the  next  Legislature,  and  calls  upon  the  people 
of  the  State  to  give  it  hearty  support. 


ILLINOIS. 

In  the  State  of  Illinois  the  statutes  require  personal  property 
to  be  listed  yearly  according  to  the  quantity  owned  on  the  ist  of 
May.  Persons  listing  are  required  to  make  statement  under 
oath  and  to  deliver  to  the  assessor  an  itemized  schedule  of  the 
number,  amounts,  quantity  and  quality  of  all  taxable  personal 


14 

property  in  their  possession  or  under  their  control.  When  any 
person  refuses  to  make  and  verify  the  schedule  required,  it  is 
the  assessor's  duty  to  list  the  property  of  such  person  accord- 
ing to  his  best  judgment,  and  to  add  a  penalty  of  50  per  cent, 
to  the  valuation;  the  person  refusing  being  subject  also  to  a  fine 
of  $200,  as  for  a  misdemeanor. 

By  1897  this  system  was  a  complete  wreck  in  Chicago  and 
was  little  better  in  the  remainder  of  the  State.  Personal  property 
in  Chicago  amounted  to  only  13.5  j)er  cent,  of  the  total  taxable 
valuation  of  all  property,  and  in  the  remainder  of  the  State  it 
amounted  to  only  17.7  per  cent.  Cook  County  (containing  the 
City  of  Chicago)  in  that  year  had  one-third  of  the  total  real  estate 
value  of  the  State  and  only  one-sixty-third  in  value  of  watches 
and  clocks,  one-ninth  as  much  money,  one-twenty-second  as  much 
value  in  carriages  and  wagons,  and  one-fifty-fifth  as  much  of 
credits. 

Recently  all  attempts  to  obey  the  letter  of  the  law  was  aban- 
doned in  Chicago,  and  for  the  tax  upon  personal  property  there 
has  been  substituted  what  is  practically  a  gross  revenue  tax  upon 
business.  Professor  Commons  has  described  this  extra-legal 
system  in  the  Review  of  Reviews.^  It  is  a  striking  testimony 
to  the  impossibility  of  enforcing  the  general  property  tax  in  a 
large  city  and  to  the  practical  nature  of  the  American  people,  who 
in  this  case  have  managed  to  work  some  sort  of  rough  justice 
while  entirely  disregarding  the  letter  of  the  law. 

The  relation  between  the  assessed  value  of  the  various  items 
of  personal  property  classified  in  Cook  County  and  in  the  re- 
mainder of  the  State  is  an  object  lesson  to  farmers  just  as  it  was 
in  1897. 

MISSOURI  CITIES. 

Missouri  is  blessed  by  the  same  kind  of  a  listing  law  as  that 
of  Ohio  and  Illinois.  There  are  only  four  large  cities  in  the 
State,  and  the  iniquitous  effect  of  personal  property  taxation  is 
clearly  shown  by  a  comparison  between  the  city  counties  and  the 
remainder  of  the  State,  or  between  the  City  of  St.  Louis  and  one 
of  the  rural  counties  (1899).  In  the  four  city  counties  personal 
property  amounts  to  less  than  14  per  cent,  of  the  total  assessed 

— — -  '—  -■  .1.  -  i.i  y  , 1  -  - — ■1,1      --— ■ .—        I  ^ 

•Febrtfery,  1903. 


15 

value  of  real  and  personal  property,  while  in  the  remainder  of 
the  State  it  amounts  to  28  per  cent.  In  St.  Louis  personal  prop- 
erty amounts  to  12  per  cent,  and  in  the  rural  county  of  Camden 
it  amounts  to  30  per  cent,  of  the  total.  Camden  County  is  an 
exceedingly  good  illustration  of  the  way  the  taxation  of  personal 
property  affects  the  farmers.  The  assessed  value  of  the  property 
in  the  county  is  $1,773,076.  Of  this  amount  30  per  cent,  is  per- 
sonal property,  and  nearly  two-thirds  of  this  personal  property 
by  value  consists  of  live  stock ;  that  is,  over  one-sixth  of  the  entire 
taxable  value  of  Camden  County  is  live  stock.  Under  a  severe 
listing  system  it  is  absolutely  impossible  for  farmers  to  avoid 
paying  taxes  on  their  live  stock,  and  the  result  is  that  farmers,  as  a 
class,  pay  vastly  more  in  taxes  than  they  ought  to  pay.  The 
effect  of  this  upon  the  cities  is  indirect,  but  none  the  less  ex- 
tremely harmful.  The  farming  industry  is  discouraged,  and 
country  boys  are  driven  to  the  cities,  where  their  competition  re- 
duces the  wages  of  those  who  are  city  born. 

WEST   VIRGINIA. 

In  West  Virginia  there  are  no  large  cities,  and  consequently 
personal  property  pays  a  large  share  of  the  taxes,  averaging  for 
the  whole  State  over  28  per  cent.  A  New  York  Assemblyman 
once  said  that  the  personal  property  tax  worked  beautifully  in 
West  Virginia,  because  there  is  a  severe  listing  system  there,  and 
he  said  that  this  proved  that  all  the  State  of  New  York  or  any 
other  State  needed  was  to  imitate  the  system  of  West  Virginia. 
This  theory  might  sound  well  to  one  unacquainted  with  the  facts, 
but,  as  always,  the  facts  in  West  Virginia  give  the  lie  to  any  theory 
of  universal  taxation. 

In  Ohio  County  town  lots  are  more  than  double  the  value  of 
farm  lands,  and  personal  property  pays  25  per  cent,  of  the  taxes ; 
while  in  Harrison  County,  in  which  farm  lands  are  six  times  the 
value  of  town  lots,  personal  property  pays  36  per  cent,  of  the 
taxes.  In  West  Virginia  a  record  is  kept  of  the  various  items 
of  personal  property.  In  Ohio  County,  which  had  more  than 
double  the  real  estate  value  of  Harrison  County,  watches  and 
clocks  are  assessed  at  $1,550,  while  in  Harrison  County  they  are 
assessed  at  $15,425,  or  ten  times  as  much.     The  27,000  inhabitants" 


■UXJ 


lii 


16 

of  Harrison  County  have  2,514  watches  and  clocks  (exclusive 
of  those  in  stock  in  stores  or  factories),  while  the  48,000  inhabi- 
tants of  Ohio  County  get  along  with  34  (according  to  the  as- 
sessors). These  figures  are  from  the  Auditor's  report  for  1902, 
and  there  is  no  evidence  of  any  improvement  since  the  report  of 
the  commission  in  1884,  which  said:  "  Things  have  come  to  such 
a  condition  in  West  Virginia  that,  as  regards  paying  taxes  on 
this  class  of  property,  it  is  almost  as  voluntary  and  is  considered 
pretty  much  in  the  same  light  as  donations  to  a  neighbormg 

church  or  Sunday  school." 

A  special  commission  on  taxation  reported  in  1902.  In  their 
report  they  advocated  the  abolition  of  taxes  on  intangible  prop- 
erty. They  said  that  strong  arguments  had  been  presented  to 
them  for  the  entire  exemption  from  taxation  of  improvements 
on  land,  and  they  recommended  that  power  be  given  to  the  munici- 
palities of  the  State  to  exempt  intangible  property,  manufactur- 
ing plants  or  all  personal  property,  also  to  exempt  improvements 
on  land  in  whole  or  in  part.  ^ 

MASSACHUSETTS. 

A  commission  appointed  to  inquire  into  the  expediency  of 
revising  the  tax  laws  of  the  State,  in  their  report,  issued  in  1897, 
says:  "The  taxation  of  personal  property  in  the  form  of  secu- 
rities and  investments  is  thus  a  failure.  It  is  incomplete,  uncer- 
tain not  proportional  to  the  means  as  between  individuals, 
grosslv  unequal  in  its  effects  in  different  parts  of  the  State.  The 
experience  of  Massachusetts  in  this  regard  is  the  same  as  that 
of  the  other  States  in  the  Union.  Everywhere,  without  excep- 
tion, the  testimony  is  that  this  part  of  the  system  of  the  general 
property  tax  is  unequal,  unsuccessful,  often  demoralizing  to  tax 
officers,  always  irritating  to  taxpayers. 

"The  experience  of  Massachusetts  is  the  more  striking 
because  here  the  difficulty  does  not  lie  mainly  in  the  adminis- 
tration of  the  tax  laws.  The  assessors  are  usually  honest,  com- 
petent, zealous.  We  have  heard  much  of  grave  abuses,  of  almost 
corrupt  laxity,  in  other  States,  but  in  this  Commonwealth, 
notwithstanding  occasional  defections  (some  of  which  we  have 
just  referred  to),  the  standard  of  public  duty  continues  to  be  high, 


17 

and  the  cause  of  failure  is  not  to  be  found  mainly  in  official  dere- 
liction.    It  lies  in  the  system  itself." 

A  special  commission  appointed  by  the  Mayor  of  Boston 
reported  in  April,  1891,  and  said  that  it  would  be  greatly  to  the 
benefit  of  Boston  to  abolish  personal  taxes  altogether.  On  page 
24  of  their  report  they  said:  "  In  Philadelphia  personal  property 
is  not  doubly  taxed:  in  New  York  it  is  seldom  doubly  taxed; 
in  Boston  the  most  strenuous  efforts  are  made  to  collect  a  double 
tax  upon  it.  Boston  and  Massachusetts  are  both  avoided  like 
a  house  guarded  by  a  savage  dog.  It  is  true  that  one  may  not 
be  bitten,  but  it  is  pleasanter  to  go  where  the  dog  is  not  so  fierce. 

"  Our  system  is  ^  scarecrow,  and  a  most  efficient  one. 

"  Both  capital  and  men  are  free  in  this  country ;  they  go  where 
they  please. 

"  Enoch  Ensley,  of  Tennessee,  lays  down  this  axiom:  '  Never 
tax  anything  that  would  be  of  value  to  your  State  that  could  and 
would  run  away,  or  that  could  or  would  come  to  you.' 

'*  Untold  millions  of  industrial  capital  has  been  warned  away 
from  Massachusetts  and  driven  out  of  it  by  our  oppressive  and 
unreasonable  laws,  and  many  a  millionaire  has  feared  to  come 
here  or  left  here  for  the  same  reason. 

"  We  all  know  that  the  value  of  real  estate  depends  upon  the 
capital  employed  on  it.  The  more  capital  there  is  the  more 
demand  for  labor.  We  should  seek  to  attract  capital.  We  should 
not  continue  to  warn  it  off  and  drive  it  out." 

A  FAILURE  IN  NEW  JERSEY. 

New  Jersey  testifies  to  the  same  eflFect.  A  commission  was 
appointed  in  that  State  by  Governor  Griggs  to  investigate  the 
subject  of  taxation  and  reported  in  1897.  The  commission  says: 
"  It  is  now  literally  true  in  New  Jersey,  as  in  other  States,  as 
has  been  well  said  by  another,  that  the  only  ones  who  now  pay 
honest  taxes  on  personal  property  are  the  estates  of  decedents, 
widows  and  orphans,  idiots  and  lunatics.  *  *  *  Xhe  reports 
of  our  State  Board  of  Taxation  for  1893,  1894  and  1895  si^ak 
of  these  things  and  decry  them,  and  like  complaints  have  come 
to  us  from  many  sources." 


II 


i8 

Then  follows  a  complete  table  of  the  counties  of  the  State, 
with  the  assessed  value  of  real  and  personal  property  and  the 
percentage  of  taxes  i)aid  by  each  class  of  property.  Tn  speaking 
of  this  table  the  commission  said:  "It  is  submitted,  this  table 
speaks  for  itself— is  a  significant  indictment  of  our  present  tax 
laws — and  reveals  evils  and  abuses  in  New  Jersey  taxation  that, 
together  with  the  foregoing,  call  for  due  and  early  remedies." 

MINNESOTA. 

Minnesota  has  the  same  constitutional  provision  with  refer- 
ence to  taxation  that  is  found  in  the  Ohio  Constitution.  In  1902 
a  tax  commission  made  a  report,  in  which  they  said:*  ''So 
universally  is  the  evasion  of  the  law  in  the  assessment  of  personal 
property  practiced  and  so  notorious  is  the  fact  that  much  the 
greater  volume  of  it  is  unassessed,  that  its  evasion  is  often 
regarded  a  virtue  rather  than  a  vice.  In  few,  if  any,  States 
is  more  than  25  per  centum  of  the  personal  property  liable  to 
taxation  listed  for  assessment. 

"  It  necessarily  results  that,  in  the  enforcement  of  the  law 
with  respect  to  such  property,  numerous  instances  of  gross  injus- 
tice occur.  So  far  as  it  is  reached  at  all  it  belongs  chiefly  to 
banks,  the  estates  of  decedents,  insolvents,  minors,  persons  of 
small  means  and  the  comparatively  few  who  conscientiously  list 

their  property. 

"  It  has  unquestionably  given  rise  to  widespread  immorality. 
Men  of  unquestioned  business  integrity  not  only  find  little  diffi- 
culty in  listing  their  property  far  below  its  real  value,  but  also 
in  making  oath  to  lists  which  they  know  to  be  false. 

"  It  has  long  been  the  policy  of  this  State,  as  well  as  many 
other  States,  to  tax  mortgages  and  other  forms  of  credit.  Long 
experience  has  demonstrated  that  such  a  law  can  at  best  be  but 
imperfectly  enforced.  Students  of  taxation,  with  scarcely  an 
exception,  denounce  it  as  fallacious  in  principle  and  a  fruitful 
source  of  inmiorality." 

In  1902  the  Legislature  adopted  an  amendment  to  the  Consti- 
tution, but  failed  to  take  the  advice  of  their  Tax  Commission, 
and  made   a   long,   complicated   amendment,   giving   additional 


19 

power  to  the  Legislature  in  minor  matters,  instead  of  abolishing 
all  restrictions  upon  the  power  of  the  Legislature.  This  amend- 
ment was  defeated  by  the  people.  This  year,  1905,  the  Legis- 
lature has  adopted  a  simple  amendment  which  practically  gives 
all  power  to  the  Legislature.  The  amendment  was  passed  by 
a  Republican  Legislature  and  signed  by  a  Democratic  Governor. 
There  is  every  prospect  of  its  acceptance  by  the  people. 

KENTUCKY. 

In  1903  Kentucky  adopted  a  constitutional  amendment 
authorizing  cities  and  towns  to  substitute  for  the  general  prop- 
erty tax  on  personal  property,  income  and  license  taxes,  and  in 
1904  a  law  was  passed  carrying  out  the  provisions  of  the  amend- 
ment. 

KANSAS. 

The  necessity  for  amendment  is  appreciated  in  Kansas,  as  is 
seen  by  the  Governor's  message  to  the  Legislature  of  1903. 
Governor  Bailey  said :  "  For  many  years  it  has  been  generally 
conceded  that  our  present  tax  law  is  insufficient  for  present  condi- 
tions, crude  and  inequitable  in  its  operation.  Framed  thirty-four 
years  ago,  when  Kansas  was  a  frontier  State,  and  all  its  property 
visible  and  easy  of  assessment,  it  is  now  imperfect  and  wholly 
inadequate  to  meet  the  changed  conditions  of  society." 

CALIFORNIA. 

Governor  Pardee,  of  California,  in  his  message  to  the  Legis- 
lature in  1903,  calls  attention  to  the  inequitable  working  of  the 
California  law,  a  law  verv  similar  to  that  of  Minnesota.  The 
Governor  said:  "The  amount  of  personal  property  assessed  in 
California  is  actually  less  by  several  millions  than  it  was  thirty 
years  ago.  As  long  ago  as  1872  the  assessors  found  nearly 
$220,000,000  worth  of  personal  property.  A  few  years  later  the 
assessment  had  shrunk  to  a  little  more  than  half  of  that  sum, 
and  though  there  has  since  been  a  slow  increase,  it  amounts  for 
the  current  year  to  only  $200,000,000." 


*  Report  Minnesota  Tax  Commission,   pp.   6  and   7,    190a. 


20 


TEXAS. 

Texas  has  a  similar  restrictive  Constitution,  and  Governor 
Sayres,  in  his  message  in  1903,  said:  "  It  is  strictly  true  that  the 
amount  of  property  escaping  taxation  steadily  increases  year  by 
year,  and  that  when  rendition  is  made  it  is  so  rated  as  to  hardly 
reach  one-third  of  its  true  market  value." 


ONTARIO. 

In  Canada  more  progress  has  been  made  in  improving  methods 
of  local  taxation  than  throughout  the  United  States;  but  until 
recently  the  general  property  tax  was  in  common  use.  It  has 
lately  been  abolished  in  the  City  of  Toronto,  largely  as  a  result 
of  the  work  of  the  Ontario  Assessment  Commission,  which  re- 
ported in  1902.  In  their  report  they  said  (page  15)  :  "  The  con- 
clusion would  seem  to  be  that  in  Ontario,  as  everywhere  else,  the 
ditect  taxation  of  personal  property  generally  fails  to  reach  the 
new  kinds  of  property  or  wealth  which  modern  civilization  has 
produced.  The  more  comprehensive  general  property  tax  which 
prevails  in  most  of  the  States  of  the  American  Union  fails  in  spite 
of  the  most  stringent  provisions  for  the  discovery  of  personal 
property.  The  various  attempts  to  compel  its  enforcement  by 
stricter  inquiries  and  greater  penalties  have  only  brought  a  train 
of  moral  evils  upon  the  community,  without  reaching  the  property 
intended  to  be  taxed.  As  Professor  Ely  has  said  of  it :  '  The 
more  you  perfect  it  the  worse  you  make  it.'  In  its  application 
to  personal  property  it  has  been  pronounced  to  be  unequal,  capri- 
cious in  its  incidence,  replete  with  incongruities,  and  its  deficien- 
cies of  principle  are  aggravated  and  exacerbated  by  its  non-en- 
forcement. 

"^From  another  entirely  different  point  of  view  the  General 
Property  Tax  fails  in  its  intended  effect.  When  taxes  are  im- 
posed on  different  classes  of  persons  in  proportion  to  their  ability 
to  pay,  measured  by  their  wealth,  it  is  with  the  object  that  those 
persons  upon  whom  the  tax  is  laid  shall  really  bear  it.  If  they 
can  shift  it  to  others  they  are  really  not  taxed.  Experience  would 
seem  to  show  that  when  merchants,  lenders  of  money,  insurance 
companies,  and  many  others  are  taxed  on  their  capitalized  prop- 


21 


erty,  the  only  effect  is  to  raise  the  price  of  goods,  the  rate  of 
interest,  premiums,  etc.,  so  that  the  tax  really  falls  upon  others, 
the  persons  who  deal  with  them." 


MARYLAND. 

As  a  member  of  the  Tax  Commission  of  the  State  of  Mary- 
land, Professor  Richard  T.  Ely  made  a  supplementary  report  in 
1888.  He  says  that  there  is  great  dissatisfaction  with  the  tax 
conditions  and  proceeds  :*  "  This  disatisf action  has  increased  with- 
out interruption  up  to  the  present  time,  and  every  year  renders 
our  existing  methods  of  assessing  property  and  of  taxing  it  more 
intolerable.  The  endeavors  to  improve  upon  actual  methods  have 
been  frequent  and  are  daily  increasing  in  frequency,  but  they 
usually  prove  fruitless  or  render  a  bad  matter  worse,  because 
those  who  make  them  have  failed  to  go  to  the  root  of  the  evil, 
which  is  the  system  itself.  The  truth  is  the  existing  system  is 
so  radically  bad,  that  the  more  you  improve  it  the  worse  it  be- 
comes. This  lies  in  the  nature  of  things  and  nothing  anv  Legis- 
lature can  do  can  alter  this  condition  of  things.  Experience  and 
reason  alike  teach  this,  and  in  my  opinion  place  it  beyond  con- 
troversy for  all  those  who  have  eyes  to  see  what  is  passing  about 
them  every  day  of  their  lives. 

"The  Testimony  of  Experience. — I  have  first  to  remark  that 
the  one  uniform  tax  on  all  property  as  an  exclusive  source  of 
revenue,  or  the  chief  source — the  main  feature  in  direct  taxation 
— never  worked  well  in  any  modern  community  or  State  in  the 
entire  civilized  world,  though  it  has  been  tried  thousands  of  times, 
and  although  all  the  mental  resources  of  able  men  have  been 
employed  to  make  it  work  well.  I  have  read  diligently  the  litera- 
lure  of  finance  to  find  an  example,  but  in  vain,  and  lest  this  should 
not  be  sufficiently  trustworthy,  I  have  made  it  my  business,  in 
my  capacity  as  Tax  Commissioner,  to  visit  typical  States  and 
cities  and  to  make  inquiries  in  person,  of  citizens  as  well  as  offi- 
cials entrusted  with  the  administration  of  the  laws.  I  have  visited 
Charleston,  South  Carolina;  Savannah.  Atlanta  and  Augusta, 
Georgia ;  Columbus,  Ohio ;  Madison,  Wisconsin ;  Toronto,  Mon- 


*  Supplementary  report  on  Taxation,  pp.   loo,   loi   and   104,   Richard  T.  Ely. 
|)oft   Maryland  Tax   Commission   to  the   General  Assembly,    1888. 


Re- 


I 


) 


22 

treal  and  Quebec,  Canada;  and  the  result  has  been  abundantly 
to  confirm  all  that  I  have  said  about  the  impracticability  of  the 
one  uniform  tax  on  real  and  personal  property." 

Theory  of  the  General  Property  Tax. 

The  theory  of  the  General  Property  Tax  requires  the  equal 
taxation  of  all  property  by  the  same  rule.  Out  of  the  attempt 
to  put  this  theor\'  in  practice  has  grown  a  further  theory  that  in 
order  to  be  equal  taxation  must  be  equally  imposed  on  all  prop- 
erty. Experience  shows  that  the  practice  antedated  the  theory. 
To  carry  out  this  theory  all  property  must  be  assessed  and  taxed 
at  its  true  value,  and  it  assumes  that  the  pressure  of  taxation 
shall  be  equal  upon  all  forms  of  property  just  as  the  pressure  of 
the  air  is  equal  upon  all  tangible  objects. 

If  the  theory  ever  could  work  anywhere,  it  could  only  work 
in  a  community  absolutely  isolated  from  all  the  rest  of  the  world. 
Under  conditions  as  they  actually  exist  a  few  comparisons  be- 
tween different  kinds  of  property  will  be  sufficient  to  show  the 
impossibility  of  obtaining  the  conditions  under  which  alone  the 
theory  could  work  with  any  degree  of  perfection.  One  who 
invests  in  real  estate  in  any  city  pays  a  price  based  upon  existing 
conditions,  and  in  effect  buys  an  annual  income;  for  example, 
he  pays  the  sum  of  $10,000  for  property  which  will  yield  $500 
a  v-ear.  If  the  property  should  yield  only  $400  he  would  pay  no 
more  than  $8,000  for  it.  He  buys  with  reference  to  known  local 
conditions.  On  the  other  hand,  if  one  buys  railroad  bonds  he 
must  pay  a  price  fixed  by  world  markets,  and  if  he  is  so  fortunate 
as  to  secure  safe  bonds  that  pay  5  per  cent.  $io,(xx)  will  buy  an 
income  of  $500  in  the  absence  of  any  taxation.  If  the  bonds  are 
taxed  23^  per  cent.,  his  income  is  but  $250,  instead  of  the  sum 
of  $500,  which  he  would  get  from  an  investment  in  real  estate. 

If  all  retail  merchants  in  a  city  are  taxed  equally  the  tax  will 
be  added  to  the  price  at  which  they  sell  their  goods,  and  they 
will  be  able  to  make  the  usual  profit  upon  capital  invested  in  such 
business.  A  manufacturer  who  makes  articles  for  export  can 
only  sell  in  competition  with  manufacturers  in  other  States  and 
countries,  and  taxes  levied  on  him  in  excess  of  taxes  upon  a  sim- 
ilar business  elsewhere  reduce  his  profits,  and  may  reduce  them 


23 

to  such  an  extent  as  to  force  him  to  remove  to  a  more  favorable 
place. 

If  money  is  invested  in  a  mortgage  in  any  State  in  which  mort- 
gages are  taxable  (except  California,  Oregon  and.  after  July  1st, 
New  York),  the  investment  is  not  l)ased  uix)n  the  e(|ual  taxation 
of  all  mortgages  in  that  State,  but  is  made  in  competition  with 
money  sent  from  outside  the  State  for  investment  there. 

Instances  showing  the  impossibility  of  treating  all  alike  by 
a  general  property  tax  imposed  equally  on  all  property  might  be 
multiplied  indefinitely.  These  examples  suffice  to  show  the  utter 
lack  of  uniformity  produced  by  a  so-called  "  equal  tax."  The 
theory  has  been  abandoned  and  a  mcKlern  theory  takes  its  place, 
which  is  that  property  must  be  classified  according  to  its  nature, 
and  taxed  or  exemped  from  taxation  in  accordance  with  justice, 
expediency  and  practicability.  This  theory  has  received  in  effect 
the  indorsement  of  one  of  our  most  thoughtful  bodies.  In  the 
case  of  Pacific  Express  Co.  7's.  Seibert  (142  U.  S.,  351),  the 
United  States  Supreme  Court  said: 

"  This  Court  has  repeatedly  laid  down  the  doctrine  that 
diversity  of  taxation,  both  in  respect  to  the  amount  imposed  and 
the  various  species  of  property  selected  either  for  bearing  its 
burdens  or  for  being  exempt  from  them,  is  not  inconsistent  with 
a  perfect  uniformity  and  equality  of  taxation  in  the  proper  sense 
of  those  terms;  and  that  a  system  which  imposes  the  same  tax 
upon  every  species  of  property,  irrespective  of  its  nature,  condi- 
tion or  class,  will  be  destructive  of  the  principle  of  uniformity 
and  equality  in  taxation  and  of  a  just  adaptation  of  property  to 
its  burdens." 

What  Shall  We  Do  ix  The  City  of  New  York? 

The  evidence  presented  could  be  multiplied  many  fold,  but  it 
seems  ample  to  demonstrate  that  every  effort  should  be  put  forth 
to  get  rid  of  the  general  property  tax,  and  that  any  attempt  to 
patch  it  up  will  only  make  a  bad  matter  worse  and  render  the 
task  more  difficult.  It  cannot  be  doubted  that  in  The  City  of 
New  York  the  public  mind  is  ready  for  great  changes,  and  that 
if  we  had  the  power  we  would. speedily  effect  a  vast  improvement. 


24 

If  we  should  propose  almost  anything  to  take  the  place  of  the 
tax  on  personal  property  it  is  certain  we  should  array  a  larger 
body  of  opinion  against  our  proposal  than  in  favor  of  it.  The 
next  step  is  to  secure  the  power  to  change. 

In  suggesting  that  we  should  secure  the  power  to  change 
we  are  not  proposing  anything  new,  but  a  remedy  which  has 
been  tried  with  success  elsewhere,  and  has  been  recommended 
here  on  many  occasions  and  in  several  forms.     It  was  recom- 
mended by  our  great  Tax  Commissioner,  George  H.  Andrews, 
in  a  memorial  to  the  Legislature  in  1874.     In  the  course  of  his 
address  to  the  Assembly  Committee  on  Ways  and  Means  Mr. 
Andrews  said:    "The  effect  of  the  present  laws  for  assessing 
personal  property  is  disastrous  to  the  owners  of  real  estate,  inas- 
much as  many  of  our  best  citizens  remove  to  the  States  already 
enumerated  to  avoid  the  operation  of  our  tax  laws.     The  real 
estate  of  the  State  needs  for  its  development  and  prosperity  resi- 
dents, capital  and  business.    These  are  the  elements  which,  cours- 
ing through  the  veins  of  the  community,  give  it  life  and  health. 
Without  these  real  estate  must  droop  and  languish,  but  with 
these  trade  must  flourish,  mechanics  find  employment,  stores  and 
tenements  be  fully  occupied,  the  farmer  find  a  ready  market  for 
his  produce,  and  the  sunshine  of  prosperity  gladden  every  heart 
and  lighten  every  burden. 

"  Under  the  operation  of  the  present  laws  real  estate  must 
continue  to  bear  more  and  more  of  the  burden  of  taxation,  and 
also  suffer  heavily  because  those  laws,  instead  of  attracting,  scare 
away  residents,  capital  and  business." 

In  his  message  to  the  Board  of  Aldermen  in  1888  Mayor 
Hewitt  recommended  that  the  City  should  have  power  to  abolish 
personal  taxes,  and  said:  "The  abolition  of  personal  taxes  in 
this  city  would  attract  to  it  the  capital  of  the  whole  world.  We 
are  now  the  centre  of  exchanges  on  the  Western  Continent,  but 
in  a  few  years  we  should  be  the  clearing  house  for  the  commerce 
of  the  globe.  *  *  *  Any  proposition  to  impose  taxation 
upon  what  people  or  corporations  owe,  instead  of  what  they  own, 
is  absolutely  unsound,  and  it  is  difficult  to  understand  by  what 
process  of  reasoning  this  policy  is  advocated.  According  to  the 
conclusions  of  the  best  financial  authorities  actual  property  should 


25 

alone  be  taxed.  Evidences  of  debt  should  never  be  taxed,  be- 
cause, as  a  rule,  they  only  represent  property  which  has  already 
been  taxed.  No  sounder  system  of  taxation  for  local  or  State 
purposes  can  be  devised  than  that  which  practically  puts  the  tax 
upon  tangible  and  visible  property,  and  upon  public  franchises 
which  have  an  actual  cash  value,  as  shown  by  their  earning 
power." 

In  190 1  the  New  York  Chamber  of  Commerce  endorsed  a 
bill  designed  to  give  The  City  of  New  York  the  power  to  make 
changes  in  its  system  of  taxation,  by  doing  two  things.  First: 
It  provides  that  the  proportion  of  revenue  The  City  of  New  York 
shall  pay  to  the  State  and  that  the  other  counties  of  the  State 
shall  pay  to  the  State,  shall  be  based  upon  the  amount  of  revenue 
derived  locally.  This  does  away  with  the  necessity  for  uniform- 
ity throughout  the  State  and  makes  possible  a  grant  of  power  to 
the  local  authorities  to  make  changes  in  the  local  system.  The 
bill  further  contains  a  section  conferring  this  grant  of  power: 

"  Sec.  4a.  Other  property  may  be  exempted  from  taxation, 
or  the  assessment  upon  the  same  reduced,  as  provided  in  this  sec- 
tion, but  such  exemption  or  reduction  of  assessment  shall  have 
uniform  operation  throughout  the  county  or  city  in  which  it  is 
made,  and  shall  not  be  made  on  the  ground  of  ownership.  Within 
any  county  such  property  shall  be  exempt  from  taxation  or  the 
assessment  upon  the  same  reduced  in  such  manner  as  th** 
board  of  supervisors  of  such  county  shall  from  time  to  time  pre- 
scribe. Within  any  incorporated  city,  extending  over  the  whole 
of  any  one  county  or  over  more  than  one  county,  such  property 
shall  be  exempt  from  taxation,  or  the  assessment  upon  the  same 
reduced  in  such  manner,  as  the  board  of  aldermen  of  such  city 
shall  from  time  to  time  prescribe.  Nothing  contained  in  an> 
special  act,  or  the  act  incorporating  any  city  or  village,  shall 
affect  the  validity  or  operation  of  any  such  exemption  or  reduc- 
tion of  assessment.  The  provisions  of  this  section  shall  not  affect 
section  four  nor  articles  nine,  ten,  fourteen  and  fifteen  of  this 
chapter,  nor  any  other  general  law  of  the  state." 

The  bill  is  printed  in  full  as  an  appendix  to  this  report.  It 
has  been  endorsed  by  the  Chamber  of  Commerce  of  the  State 
of  New  York,  the  State  Commerce  Convention,  Board  of  Trade 


ill 


26 

and  Transportation,  Merchants'  Association,  West  End  Associa- 
tion United  Real  Estate  Owners'  Associations.  Business  Men  s 
>\ss^iation  of  Cohoes.  and  other  associations  of  business  men. 
the  Central  Federated  Union,  the  Building  Trades  Council  and 
many  other  labor  organizations. 

It  will  be  seen  that  provision  is  made  not  only  for  the  exemp- 
tion of  property  from  taxation  altogether,  but  for  a  reduction 
of  the  rate  of  assessment  if  that  shall  be  deemed  desirable.     It 
might  be  that  instead  of  abolishing  the  tax  on  some  forms  of 
property  entirely  it  would  be  deemed  wise  to  reduce  the  rate,  and 
if  the  experience  of  Pennsylvania  and  Connecticut  is  worth  any- 
thing it  is  demonstrated  that  a  smaller  tax  on  certain  forms  of 
personal  property  will  produce  a  considerably  larger  revenue  than 
a  larger  tax.     Again,  the  main  objection  to  the  abolition  of  the 
tax  upon  personal  property  is  that  the  rate  would  be  increased 
upon  real  estate,  and  thus  tend  to  check  improvements  and  make 
the  building  of  homes  for  the  people  more  costly.     The  power 
to  reduce  the  assessment  on  any  form  of  property  would  permit 
a  reduction  of  the  rate  of  assessment  upon  dwellings  and  other 
improvements.     This  would  entirely  counteract  any  tendency  to 
check  the  erection  of  buildings,  and  indeed  would  encourage  their 

erection. 

So  long  as  a  tax  on  land  does  not  increase  faster  than  the 
value  of  the  land  increases,  it  is  not  a  burden  upon  the  owner. 

Professor  Ely  says:* 

"  When  the  tax  on  the  value  of  land  is  liable  to  comparatively 
slight  variation,  and  is  something  which  can  be  calculated  upon 
a.  a  fixed  and  unalterable  fact,  it  partakes  of  the  nature  of  a 
charge  upon  the  land,  and  to  this  extent  it  may  be  said  to  amount 
simply  to  partial  public  ownership.    A  farmer  owns,  lets  us  say, 
one  hundred  acres  of  ground  purchased  for  $10,000,  but  a  mort- 
gage for  $5,000  rests  on  it  because  he  was  able  to  pay  only  one- 
half  of  the  purchase  money.     He  feels  the  burden  of  taxation 
and  groans  under  it,  yet  he  should  reflect  that  he  would  be  no 
better  off  if  his  land  had  never  been  taxed,  for  in  that  case  he 
would  have  been  obliged  to  pay  so  much  more  for  it,  and  instead 
of  being  $5,000  in  debt,  he  would  owe,  perhaps,  $7,000.     I  re- 


1888. 


.  Taxation  in  American  states  and  cities.  Richard  T.  Ely.  pp;  2^6.  2,7  and  .48. 


97 

cently  purchased  a  house,  and  in  deciding  how  much  I  was  will- 
ing to  pay,  I  took  into  consideration  the  taxes.  If  the  house 
had  been  exempt  from  taxation,  I  would  have  been  asked  more 
for  it,  and  would  have  been  willing  to  give  proportionately  more. 
How,  then,  can  I  say  that  I  am  really  bearing  any  burden  at  all? 
I  simply  pay  the  public  annually  for  its  claim  on  my  property, 
and-if  this  claim  should  be  released,  it  would  be  equivalent  to  a 
present  to  me.  Of  course,  if  the  rate  of  taxation  is  raised,  it 
amounts  to  this,  that  the  claim  on  my  property  is  raised  and  the 
value  of  the  part  owned  by  the  public  increases.  The  more  in- 
variable and  permanent  taxes  are,  the  larger  the  extent  to  which 
the  above  principle  can  be  applied.     *     *     * 

"Apart  from  this,  land  is  visible,  easily  valued,  and  permanent 
in  its  location,  and  these  qualities  render  it  specially  suitable  for 
taxation.  The  following  reasons  have  also  been  given  for  a  tax 
on  real  estate,  more  particularly  on  land:  Land  derives  an  in- 
creased value  from  public  security  and  from  public  works,  and 
taxes  are  expended  chiefly  for  these  two  purposes.  This  is  so  true 
with  reference  to  public  improvements  that  many  of  our  growing 
cities  have  become  embarrassed  by  expenditure  made  at  the  solici- 
tation of  land  owners,  particularly  on  occasion  of  *  booms,'  and 
not,  as  popularly  imagined,  by  the  moneyless  rabble.  An  instance 
recently  occurred  in  Buflfalo,  where  large  expenditures  were 
forced  upon  the  people  by  real  estate  owners,  and  against  the 
protest  of  at  least  some  of  the  workingmen.  A  second  reason 
is  that  the  tax  may  be  considered  as  a  return  to  the  community 
for  the  rights  which  it  has  surrendered  in  what  was  once  com- 
mon property. 

"All  assessors  should  be  by  law  especially  directed  to  assess 
to  the  last  dollar  of  its  true  value  all  real  estate  held  for  specula- 
tive purposes.  There  is  a  common  ajid  iniquitous  practice,  which 
I  have  observed  everywhere  in  my  investigations,  of  undervalu- 
ing land  held  for  a  rise,  and  not  used  at  all,  or  used  only  for  some 
unnatural  purpose,  as  when  city  lots  are  utilized  as  cow  pastures. 
Such  land  is  occasionally  actually  valued  as  farm  land.  Thus 
men^  without  a  stroke  of  work,  and  even  while  obstructing  the 
natural  growth  of  cities,  see  their  property  steadily  increase  in 
value,  and  this  is  solely  due  to  the  industry  and  thrift  of  their 
fellows." 


28 

Summary. 
In  view  of  the  experience  of  foreign  countries  and  those  Amer- 
ican States  which  have  employed  the  most  thorough  and  stringent 
means  of  taxing  personal  property,  it  is  plain  that  the  system  is 
wrong  in  principle  and  should  be  abolished ;  that  any  plan  for 
enforcing  the  law   more  efficiently  by   repealing   the   provision 
allowing  the  deduction  of  debts  from  personal  assets,  by  subject- 
ing additional  property  of  non-residents  to  taxation,  or  by  requir- 
ing sworn  statements  from  taxpayers,  will  increase  the  injustice 
now  done  to  individuals  and  work  against  the  interest  of  real 
estate  owners  by  driving  away  persons  and  property  which  alone 
give  value  to  citv  real  estate.     By  increasing  the  amount  col- 
lected for  a  time  it  will  render  the  abolition  of   the    tax   more 

difficult. 

Personal  property  amounts  to  13%  of  all  the  property 
assessed  in  The  City  of  New  York,  but  over  one-third  of  the 
personal  taxes  are  not  collected,  so  that  in  fact  personal  property, 
assessed  for  the  general  property  tax,  only  pays  about  8%  of 
the  taxes.  It  would  be  greatly  to  the  advantage  of  all  the  people 
of  the  citv  to  abolish  the  tax  at  once  and  entirely.  In  view  of 
the  relation  of  the  City  to  the  State  this  is  impossible,  and  I 
therefore  recommend  to  the  Commission  for  their  approval  the 
annexed  bill  for  the  Apportionment  of  State  Taxes  and  for  Local 
Option  in  Taxation.  .  Lawson  Purdy, 


29 


APPENDIX. 

An  Act  to  amend  the  Tax  Law  by  providing  for  the  apportion- 
ment of  State  Taxes  and  for  local  option  in  taxation. 

The  People  of  the  State  of  New  York,  represented  in  Senate 
and  Assembly,  do  enact  as  folloivs: 

Section  i.  The  Tax  Law  is  hereby  amended  by  adding  there- 
to, after  Section  4,  the  following  section : 

§  4a.  Other  property  may  be  exempted  from  taxation,  or  the 
assessment  upon  the  same  reduced,  as  provided  in  this  section, 
but  such  exemption  or  reduction  of  assessment  shall  have  uni- 
form operation  throughout  the  county  or  city  in  which  it  is  made, 
and  shall  not  be  made  on  the  ground  of  ownership.  Within  any 
county  such  property  shall  be  exempt  from  taxation,  or  the 
assessment  upon  the  same  reduced  in  such  manner,  as  the  lx)ard 
of  supervisors  of  such  county  shall  from  time  to  time  prescribe. 
Within  any  incorporated  city,  extending  over  the  whole  of  any 
one  county  or  over  more  than  one  county,  such  property  shall 
be  exempt  from  taxation,  or  the  assessment  upon  the  same 
reduced  in  such  manner,  as  the  board  of  aldermen  of  such  city 
shall  from  time  to  time  prescribe.  Nothing  contained  in  any 
special  act,  or  the  act  incorporating  any  city  or  village,  shall 
aflfect  the  validity  or  operation  of  any  such  exemption  or  reduc- 
tion of  assessment.  The  provisions  of  this  section  shall  not  aflfect 
section  four  nor  articles  nine,  ten,  fourteen  and  fifteen  of  this 
chapter,  nor  any  other  general  law  of  the  State.* 

Section  2.    Section  171  of  the  Tax  Law  is  hereby  amended 

by  adding  thereto  the  following :     . 

Ninth.  Obtain  annually  from  the  financial  officer  or  other 
officer  or  person  charged  with  the  custody  and  disbursement  of 
any  funds  of  each  tax  district  of  the  state  a  report  of  the  amount 
of  gross  revenue  of  each  tax  district  for  the  preceding  calendar 
year  and  the  sources  of  such  revenue ;  and  for  this  purpose  such 
local  officer  of  each  tax  district,  at  the  expense  of  such  district. 


•  Section  four,  of  this  Chapter,  provides  that  certain  property  shall  be  exempt 
from  taxation.  Articles  nine,  ten,  fourteen,  and  fifteen  deal  with  the  taxation,  for 
State  purposes,  of  corporations;  transfers  of  property  by  will,  by  the  inte/state  laws 
ot  the  State  or  in  expectation  of  death;  the  tax  on  sales  of  stock;  and  on  mortgages. 


30 

shall  furnish  such  information  in  such  form  as  may  be  required 
by  the  state  board  of  tax  commissioners.  Neglect  or  refusal 
to  file  a  true  and  correct  report  in  the  office  of  the  state  board 
of  tax  commissioners  at  the  time  and  in  the  form  required  by 
the  board  is  a  misdemeanor,  the  making  and  filing  of  a  report 
containing  a  willful  misstatement  is  a  felony. 

Tenth.  Classify  and  file,  according  to  tax  districts,  the  reports 
of  gross  revenue  which  they  obtain  from  local  officers. 

Eleventh.  Examine  the  reports  of  gross  revenue  filed  with 
them,  and  tabulate  the  results  of  such  examination,  so  as  to  show 
summarily,  and  in  separate  tables,  for  each  tax  district,  for  each 
county  and  for  all  the  counties  of  the  State,  and  for  each  calendar 
year,  (i)  the  gross  revenue,  (2)  the  sources  of  such  revenue, 
(3)  any  other  results  which  they  think  it  for  the  public  interest 
to  exhibit.  They  shall  present  a  report  of  the  results  of  such 
ffxamination  to  the  state  board  of  apportionment  at  its  meeting 
on  the  first  Tuesday  in  September. 

"  Tax  district,"  as  used  in  this  section  and  in  section  173  of 
this  chapter,  means  a  political  subdivision  of  the  state,  having  a 
board  of  assessors,  or  an  assessor  or  officer,  authorized  to  assess 
property  therein  for  taxation  for  state,  county,  city,  village,  school, 
liighway,  or  any  other  purpose  whatever,  or  having  an  officer  or 
officers  authorized  to  sign  warrants  for  the  collection  of  taxes. 

"  Gross  revenue,"  as  used  in  this  section,  and  in  section  173  of 
this  chapter,  means  the  total  sum  of  money  received  by  any  tax 
district  for  public  purposes,  and  the  value,  at  the  rate  of  commuta- 
tion allowed  by  law,  of  work  performed  for  the  tax  district  with- 
out compensation  under  a  requirement  of  law.  But  it  does  not 
include  assessments  for  local  improvements,  money  borrowed, 
money  received  as  interest  on  any  obligation  of  the  tax  district 
owned  by  said  district  or  held  in  trust  for  it  by  any  board  or 
officer,  or  so  much  of  the  revenue  from  sales  to  private  users  of 
water,  gas,  electricity,  or  other  industrial  service  as  represents 
the  cost  thereof. 

For  the  purpose  of  this  section,  and  of  section  173  of  this 
chapter,  the  city  of  New  York  shall  be  deemed  to  be  one  county. 


31 

Section  3.  Section  173,  of  the  Tax  Law,  is  hereby  atnended 
so  as  to  read  as  follows: 

§  173.  State  board  of  lequalbatiou]  apportionme*nt  powers 
and  duties. 

The  commissioners  of  the  land  office  and  the  three  commis- 
sioners of  taxes  shall  constitute  the  state  board  of  [^equalication] 
apportionment.  The  state  board  of  [cqualhation']  apportionment 
shall  meet  in  the  city  of  Albany  on  the  first  Tuesday  in  September 
in  each  year  [for  the  purpose  of  examining  and  revising  the  valua- 
tions of  real  and  personal  property  of  the  several  counties  as 
returned  to  the  board  of  tax  commissioners,  and  shall  fix  the 
aggregate  amount  of  assessment  for  each  county,  upon  which  the 
controller  shall  compute  the  state  tax.  Such  board  may  increase 
or  diminish  the  aggregate  valuations  of  real  property  in  any  county 
by  adding  or  deducting  such  sum  as  in  its  opinion  may  be  just  and 
necessary  to  produce  a  just  relation  betzveen  the  valuations  of  real 
property  in  the  state.  But  it  shall,  in  no  instance,  reduce  the 
aggregate  valuations  of  all  the  counties  below  the  aggregate  valua- 
tions thereof  as  so  returned]  and,  at  such  meeting,  shall  ascertain 
and  determine  the  percentage  of  state  tax  each  county  shall  pay, 

by  dividing  the  sum  of  the  gross  revenue,  for  the  preceding  cal- 

• 

endar  year,  of  each  county  including  all  the  tax  districts  within 
the  county,  by  the  sum  of  the  gross  revenue  of  all  the  tax  districts 
of  the  state  for  the  same  year.  The  comptroller  shall  immediately 
ascertain  from  this  [assessment]  determination  of  the  percentage 
of  state  tax  which  each  county  shall  pay,  a  copy  of  which  shall 
be  transmitted  to  him,  the  [proportion]  amount  of  state  tax  each 
county  shall  pay,  and  mail  a  statement  of  the  amount  to  the  county 
clerk  and  to  the  chairman  and  clerk  of  the  board  of  supervisors 
of  each  county. 

Section  4.  This  act  shall  take  eflfect  October  first,  1906. 


Explanation. — Matter  underscored 
in  brackets  [  ]  is  old  law  to  be  omitted. 


is  new;  matter 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance, 


REPORT     OF 


COMMITTEE    ON 
TAXATION    AND    REVENUE. 


DECEMBER,    190?, 


Nbw  York  : 

MARTIN  B.  BROWN  COMPANY.  PRINTERS  AND  SIATIONERS 

Nos.  49  TO  57  Park  Placb. 

> 
1905. 


I 

I! 


I 


ADVISORY    COMMISSION 


ON 


Taxation  and  Financr 


Chairman, 
Edgar  J.  Levey. 


Committee  on  Taxation  and  Revenue, 


Lawson  Purdy, 
Edwin  R.  A.  Seligman, 
Francis  Lynde  Stetson, 


Frank  A.  O'Donnel, 
Alonzo  Bell, 
Morris  K.  Jesup. 


Committee  on  the  City  Debt  and  Special  Assessments. 

* 
Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  John  J.  Delany, 

Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


. .  .i-^i4luiiiiiaeikds^yi^^ 


CONTENTS. 


Statement  of  uncollected  taxes  prior  to  1899 

Statement  of  uncollected  taxes,  1899  to  1905 

Report  concerning  uncollected  taxes 

Act  to  authorize  issue  of  corporate  stock  for  arrears  of  taxes 

Act  for  levying  taxes  to  provide  for  deficiencies  in  actual  product  of 
taxes  levied 

Memorandum,  arrears  of  taxes  and  proposed  acts 

Amount  of  uncollected  taxes 

Method  of  financing  City 

Revenue  bonds  outstanding 

Funded  debt 

Deficiency  due  to  uncollectible  taxes 

The  annual  deficiency 

What  taxes  are  uncollectible .• 

Method  of  computing  the  city  debt 

Report  as  to  change  in  time  of  collecting  taxes 

Report  of  Mr.  Bell  on  Senate  Bill  changing  date  for  payment  of  taxes 

Amendment  in  relation  to  property  omitted  from  tax  roll 

Amendment  in  relation  to  applications  for  remission  or  reduction  of  taxes. . . 
Amendment  ii)  relation  to  refunding  by  the  State  of  uncollected  direct  taxes. 


PAGE 

m 

3 
6 

7 
7 

7 
8 

9 
II 

12 

13 

14 
16 

17 
20 
22 
24 

34 
35 
36 


LEHER  OF  TRANSMIHAL 


New  York,  December  22,  1905. 

Hon.  George  B.  McClellan, 

Mayor  of  The  City  of  New  York : 

Dear  Sir — Among  the  subjects  which  your  Advisory  Commis- 
sion on  Finance  was  requested  to  consider  is  that  of  the  City's  un- 
collectible arrears  of  taxes.  This  subject  was  mentioned  in  your 
last  annual  message  to  the  Board  of  Aldermen  and  was  specifically 
referred  to  this  Commission  by  your  letter  of  February  28,  1905, 
in  the  following  manner : 

"  Methods  of  collecting  and  enforcing  the  payment  of  taxes  in 
The  City  of  New  York,  bearing  in  mind  the  ever-increasing 
amount  of  uncollected  personal  taxes  and  the  difficulty  of  properly 
conducting  the  finances  of  the  City  with  the  product  of  the  tax 
levied  each  year  falling  further  and  further  behind  the  total  ap- 
propriation." 

Your  Commission  regards  this  question  not  only  as  one  of  the 
most  important  referred  to  it  for  consideration,  but  also  as  one 
which  calls  for  immediate  and  comprehensive  reform.  Having 
reached  certain  practical  conclusions  in  regard  thereto,  which  have 
been  embodied  in  drafts  for  bills  to  be  prepared  for  legislative 
action,  your  Commission  desires  at  this  time  to  make  a  partial  re- 
port, so  that  action  thereon  need  not  await  the  further  deliberation 
required  for  the  other  subjects  now  engaging  your  Commission's 
attention. 

At  a  meeting  of  your  Commission,  held  December  20,  1905, 
the  Committee  on  Taxation  and  Revenue  presented  a  report  and 
the  Commission  unanimously  adopted  the  following  resolution : 

Resolved,  That  the  partial  report  of  the  Committee  on  Tax- 
ation and  Revenue  be  and  hereby  is  accepted  and  adopted  as  a  re- 
port of  this  Commission,  and  that  it  be  transmitted  to  the  Mayor 
as  a  partial  report  of  this  Commission  upon  the  matters  submitted 
for  its  consideration,  with  a  suitable  explanatory  letter  from  the 
Chairman  and  Secretary. 


In  accordance  with  this  resolution,  we  present  to  you  herewith 
the  partial  report  of  the  Committee  on  Taxation  and  Revenue. 
This  report  is  the  result  of  very  careful  consideration  upon  the 
part  of  the  committee,  which  has  had  frequent  meetings  since  its 
appointment  in  March. 

In  the  report  will  be  found  a  statement  showing  the  uncollected 
taxes  for  the  years  1898  and  prior  at  October  i.  190S.  and  a  state- 
ment of  uncollected  taxes  for  the  years  1899  to  October  i,  1905,  in 
which  is  shown  the  actual  levy,  the  amount  collected,  discounts, 
cancellations,  uncollected  balances,  and  the  amount  provided  in  tax 
levies  for  deficiency  in  the  product  of  taxes.  We  have  analysed 
these  tables  and  explained  the  reason  why  under  the  provisions  of 
the  Charter  and  Tax  Law  of  the  State  a  very  large  amount  of 
taxes  is  in  arrears,  of  which  more  than  one  half  is  uncollectible. 
We  have  made  an  estimate  of  the  exact  sum  uncollectible  and  it 
amounts  to  $33,791,172.95.  Of  this  amount  over  $30,006,000  is 
on  account  of  uncollected  personal  taxes.  About  one-third  of  the 
tax  levy  on  personal  property  each  year  is  uncollectible.  This 
will  continue  to  be  the  case  so  long  as  we  have  our  antiquated  sys- 
tem of  imposing  taxes  on  all  forms  of  personal  property  in  the 
same  manner  as  upon  real  estate.  In  practice,  through  what  may 
be  no  fault  of  the  Department,  many  persons  are  assessed  for  per- 
sonal property  who  have  no  property  and  from  whom  in  conse- 
quence no  tax  can  be  collected. 

By  skillful  methods  of  financing  the  City,  which  we  approve,  it 
has  been  possible  up  to  the  present  time  to  carry  on  the  City's 
affairs  without  increasing  the  City  debt  on  account  of  the  large 
deficiency,  except  as  it  has  been  necessary  to  issue  a  somewhat 
larger  amount  in  revenue  bonds  than  should  be  issued.  The  limit, 
however,  has  been  practically  reached,  and  unless  provision  is 
made  for  the  existing  arrears  and  for  preventing  the  accumula- 
tion of  arrears  in  the  future  the  financial  department  of  the  City 
will  be  seriously  embarrassed. 

We  were  confronted  with  two  problems.  First,  to  provide  for 
the  existing  arrears,  and  second,  to  provide  for  an  annual  clear- 
ance of  future  arrears. 

To  provide  for  existing  arrears  we  propose  an  act  directing 
the  Board  of  Estimate  and  Apportionment  to  authorize  corporate 
stock  of  The  City  of  New  York  to  be  issued  to  an  amount  equal 
to  so  much  of  the  deficiency  on  the  first  day  of  January,  1905,  in 
the  product  of  taxes  theretofore  levied  and  deemed  by  the  Board 
to  be  uncollectible,  as  shall  not  have  been  provided  for  in  prior 


tax  levies  or  by  the  issue  of  Corporate  Stock  of  The  City  of  New 
York.  At  first  sight  this  may  appear  to  increase  the  City's  debt, 
and  hence  to  limit  the  amount  which  may  be  borrowed  for  needed 
public  improvements.  A  closer  study  shows,  however,  that  in 
order  to  provide  the  necessary  funds  for  current  expenses  the 
City  is  now  issuing  revenue  bonds  for  the  account  of  taxes  of 
previous  years  which  are  still  uncollected,  and  these  revenue  bonds 
form  part  of  the  City's  debt  which  limits  its  borrowing  capacity. 
The  proposed  act  does  not  require  the  immediate  issue  of  the  Cor- 
porate Stock  autliorized  by  the  Board  of  Estimate,  but  it  may  be 
issued  in  such  amounts,  from  time  to  time,  as  may  be  deemed 
wise  by  the  Comptroller,  to  retire  outstanding  revenue  bonds 
issued  in  anticipation  of  the  collection  of  taxes  of  previous  years, 
and  to  provide  funds  to  meet  payments  upon  the  contract  liabili- 
ties of  the  City  when  the  money  provided  for  such  payment  by 
previous  issues  of  Corporate  Stock  has  already  been  used  for  the 
current  expenses  of  the  City.  We  are  satisfied  that  the  City  must 
be  empowered  to  borrow  an  amount  equal  to  the  uncollectible  de- 
ficiency in  the  taxes  of  past  years,  and  it  is  cheaper  for  the  City 
to  borrow  this  money  on  Corporate  Stock  than  on  revenue  bonds 
as  it  is  doing  to-day. 

For  reasons  which  we  explained  in  our  report  the  provisions 
of  chapter  639  of  the  Laws  of  1905  authorizing  continually  recurr- 
ing issues  of  Corporate  Stock  to  make  good  these  deficiencies,  we 
consider  objectionable  and  not  in  harmony  with  the  plan  we  pro- 
pose.   We  have  therefore  recommended  its  repeal. 

The  second  problem,  consisting  of  the  annual  deficiency  in 
the  product  of  taxes,  we  have  met  by  providing  that  the  Board  of 
Estimate  and  Apportionment  shall  annually  insert  in  th^  budget 
a  sum  equal  to  so  much  of  the  deficiency  on  the  preceding  first  day 
of  January  in  the  product  of  taxes  theretofore  levied  and  deemed 
by  the  Board  to  be  uncollectible,  as  shall  not  have  been  provided 
for  in  prior  tax  levies  or  by  the  issue  of  Corporate  Stock  of  The 
City  of  New  York,  or  by  such  Corporate  Stock  authorized  by  said 
Board  to  be  issued.  This  is  accomplished  by  an  amendment  to 
section  230  of  the  Charter  which  shall  take  effect  October  i,  1906. 
By  this  act  we  propose  to  repeal  the  section  of  the  Charter  which 
authorizes  and  directs  the  Board  of  Aldermen  to  increase  the  tax 
levy  to  make  good  a  deficiency  in  the  product  of  taxes,  a  provision 
of  law  which  is  quite  inadequate  and  requires  an  estimate  of 
future  conditions  instead  of  a  dealing  with  past  and  known  quanti- 
ties.   But  as  that  section  will  not  be  repealed  until  October  ist  the 


Board  of  Aldermen  in  August,  1906,  will  increase  the  tax  levy  for 
1906  by  the  usual  amount  added  for  the  deficiency.  At  the  meet- 
ing of  the  Board  of  Estimate  in  October  they  will  insert  in  the 
budget  for  the  tax  levy  of  1907  an  amount  which  will  provide  for 
all  uncollectible  arrears  not  theretofore  provided  for  up  to 
January,  1906.  Thereafter  every  year  the  Board  of  Estimate  and 
Apportionment  will  provide  for  all  deficiencies  in  the  collection 
of  taxes  so  far  as  the  same  are  uncollectible  up  to  the  first  of 
January  preceding. 

In  our  report  we  have  explained  exactly  how  we  arrive  at  the 
amount  of  the  uncollectible  arrears,  and  the  method  of  financing 
the  City  by  which  it  has  been  enabled  to  pay  its  bills  in  spite  of  the 
large  arrears.  We  have  explained  how  it  may  be  determined  that 
taxes  are  uncollectible,  and  the  method  of  computing  the  City  debt. 

Report  as  to  the  Propriety  of  a  Change  in  the  Time  of 

Collecting  Taxes. 

Another  subject  submitted  to  the  committee  for  consideration 
is  the  propriety  of  a  change  in  the  time  for  collecting  taxes.  The 
committee  presents  a  report  made  by  Mr.  Bell  upon  a  proposal  to 
change  the  date,  but  the  committee  concluded  that  it  was  not  neces- 
sary to  express  an  opinion  upon  the  merits  of  the  particular  bill 
discussed  by  Mr.  Bell  for  the  reason  that  after  careful  considera- 
tion of  the  whole  subject  the  committee  was  convinced  that  it  is 
not  desirable  to  change  the  present  method  of  providing  current 
funds  for  the  City's  needs. 

Other  Amendments  Proposed. 

The  committee  presents  two  amendments  to  the  charter,  and 
one  to  the  Tax  Law,  which  relate  to  details  of  assessment  and  taxa- 
tion, and  which  are  sufficiently  explained  in  the  report. 

Yours  respectfully, 

Edgar  J.  Levey, 

Chairman. 

Lawson  Purdy, 

Secretary. 


STATEMENT. 

Showing  Uncollected  Tax  for  the  Years  1898  and  Prior, 

AT  October  i,  1905. 

Arrears  of  Taxes,  1898  and  prior: 

Personal — Manhattan  and  Bronx.$9,323,475  99 

Brooklyn    741,057  49 

$10,064,533  48 

Arrears  of  Taxes,  1898  and  prior: 

Real   Estate — Manhattan $1,321,60873 

Bronx   233,204  89 

Brooklyn    303.I54  9° 

Queens    528,370  39 

Richmond    250,000  00 

2,636,338  91 

Grand  total  $12,700,872  39 


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Recommendations  Concerning  the  Deficiency  Caused 
by  Arrears  of  Uncollectible  Taxes. 


PROPOSED  BILLS. 

Draft  of  an  Act  to  Authorize  the  Board  of  Estimate  and  Appor- 
tionment in  The  City  of  New  York  to  Issue  Corporate 
Stock  of  the  City  for  Arrears  of  Uncollectible  Taxes. 

Section  i.  The  board  of  estimate  and  apportionment  of  The 
City  of  New  York  shall  on  or  before  the  first  day  of  October,  1906, 
authorize  corporate  stock  of  The  City  of  New  York  to  be  issued 
to  an  amount  equal  to  so  much  of  the  deficiency,  on  the  first  day 
of  January,  1905,  in  the  product  of  taxes  theretofore  levied  and 
deemed  by  the  board  to  be  uncollectible,  as  shall  not  have  been 
provided  for  in  prior  tax  levies  or  by  the  issue  of  corporate  stock 
of  The  City  of  New  York.  Such  corporate  stock  shall  be  author- 
ized to  be  issued  by  the  board  of  estimate  and  apportionment  with- 
out the  concurrence  or  approval  of  any  other  board  or  public  body. 

Section  2.  This  act  shall  take  effect  immediately. 

Draft  of  an  Act  to  Amend  the  Greater  New  York  Charter  by 
Providing  for  the  Levying  of  Taxes  to  Provide  for  Defi- 
ciencies in  the  Actual  Product  of  Taxes  Theretofore  Levied. 

Section  i.  Section  230  of  the  Greater  New  York  Charter  is 
hereby  amended  by  inserting  a  new  subdivision  to  be  subdivision 
first ;  subdivisions  first  to  ninth  to  be  numbered  second  to  tenth,  re- 
spectively, and  the  new  subdivision  to  read  as  follows: 

First — A  sum  equal  to  so  much  of  the  deficiency,  on  the  pre- 
ceding first  day  of  January,  in  the  product  of  taxes  theretofore 
levied  and  deemed  by  the  board  to  be  uncollectible,  as  shall  not 
have  been  provided  for  in  prior  tax  levies  or  by  the  issue  of  cor- 
porate stock  of  The  City  of  New  York,  or  by  such  corporate 
stock  duly  authorized  by  said  board  to  be  issued. 

Section  2.  Section  248  of  the  Greater  New  York  Charter  is 
hereby  repealed. 


8 


Section  3.  By  this  section  repeal  chapter  639  of  the  Laws  of 
1905,  amending  section  169  of  the  charter. 

Section  4.  This  act  shall  take  effect  October  first,  1906. 

Memorandum  as  to  Arrears  of  Taxes  and  Proposed  Amend- 
ment. 

On  October  i,  1905,  the  uncollected  taxes  of  The  City  of  New 
York  for  preceding  years  amounted  to  the  total  sum  of  $63,524,- 
814.60.  Of  this  amount,  $35,196,206.18  are  taxes  on  personal 
property,  $13,959,941.22  are  taxes  on  real  estate  other  than  special 
franchises,  and  $14,368,667.20  are  taxes  on  special  franchises. 

This  is  an  enormous  sum,  and  increases  at  the  rate  of  more 
than  three  million  dollars  a  year.  The  condition  is  not  due  to  any 
fault  of  city  officials,  but  is  wholly  the  result  of  unwise  and  inade- 
quate charter  provisions.  In  order  that  the  remedy  which  we 
propose  may  be  thoroughly  understood  it  is  necessary  first  to  ex- 
plain somewhat  fully  the  law  and  practice  governing  the  financial 
management  of  the  city,  and  show  how  and  why  there  should  be 
so  large  an  amount  of  taxes  uncollected. 

The  charter  requires  that  the  estimate  of  city  expenses  for  the 
following  year  shall  be  made  in  the  month  of  October.  When 
this  estimate  is  complete  and  approved  by  the  Board  of  Estimate 
and  Apportionment  it  is  called  the  Budget.  It  cannot  be  increased 
but  may  be  diminished  by  the  Board  of  Aldermen.  When  ap- 
proved by  the  Board  it  must  be  raised  by  taxation.  The  taxable 
property  of  the  city  is  assessed  in  the  autumn  months,  the  books 
are  opened  in  January,  closed  at  the  end  of  March,  and  delivered 
to  the  Board  of  Aldermen  the  first  week  in  July.  The  Comptroller 
certifies  to  the  Board  of  Aldermen  the  amount  of  the  Budget  and 
the  estimated  revenue  from  the  general  fund.  It  is  thereupon 
the  duty  of  the  Board  to  add  an  amount  not  exceeding  3  per 
cent,  of  the  sum  to  be  raised  by  taxation  to  provide  for  deficien- 
cies in  the  actual  product  of  taxes  levied.  The  Board  then 
determines  the  rate  of  taxation  which  will  be  necessary  to  raise 
the  amount  of  the  Budget,  including  the  deficiency  item,  less  the 
revenue  from  the  general  fund.     The  asesssment  rolls  with  the 


warrants  for  the  collection  of  taxes  are  now  sent  to  the  receiver 
of  taxes,  and  taxes  become  due  and  payable  on  the  first  Monday 
of  October. 

The  practice  of  the  Board  of  Aldermen  for  many  years  has 
been  to  provide  a  smaller  sum  for  the  deficiency  than  the  3  per 
cent,  allowed ;  whereas  in  fact  the  deficiency  has  been  considerably 
more  than  3  per  cent.  The  deficiency  in  the  collection  of  taxes 
comes  about  in  the  following  ways: 

A  discount  is  allowed  for  the  payment  of  taxes  before  the  first 
of  November,  and  this  decreases  the  actual  collection. 

There  are  some  cases  every  year  in  which  assessments  of  real 
estate  and  personal  property  are  reduced  by  an  order  of  the  court 
after  proceedings  brought  to  review  the  action  of  the  Tax  Com- 
missioners. When  the  court  reduces  the  assessed  valuation  of 
real  estate  or  personal  property  the  amount  of  tax  lost  to  the 
City  swells  the  deficiency. 

These  two  items,  however,  are  small  compared  with  the  very 
great  discrepancy  between  the  amount  of  the  tax  actually  levied 
upon  personal  property  and  the  amount  collected.  This  will  con- 
tinue to  be  the  case  so  long  as  we  have  our  antiquated  system  of 
imposing  taxes  on  all  forms  of  personal  property  in  the  same 
manner  as  upon  real  estate.  In  practice,  through  what  may  be  no 
fault  of  the  department,  many  persons  are  assessed  for  personal 
property  who  have  no  property,  and  from  whom  in  consequence 
no  tax  can  be  collected.  The  amount  of  the  tax  on  personal  prop- 
erty which  cannot  be  collected  has  run  as  high  as  one-third  of  the 
total  amount  levied.  For  five  of  the  six  years  since  consolidation 
the  amount  of  the  uncollected  taxes  on  personal  property  has  only 
once  been  less  than  four  million  dollars,  and  in  two  years  was 
more  than  four  and  a  half  millions. 


The  Amount  of  the  Deficiency. 

In  an  appendix  to  this  report  we  present  tables  showing  the 
actual  levy  of  taxes  on  real  and  personal  property  and  special 
franchises,  the  amount  of  the  collections,  discounts,  cancellations, 


10 

uncollected  balances,  and  the  amount  actually  provided  in  the 
various  tax  levies  for  deficiencies  in  the  product  of  taxes. 

From  these  tables  it  appears  that  the  arrears  of  taxes  for  the 
years  prior  to  1899  amount  to  $12,700,872.39.  Of  this  amount 
$2,636,338.91  is  the  tax  upon  real  estate,  and  most  of  it  is  col- 
lectible. A  very  small  part  of  it  may  not  be  collectible  because  of 
the  peculiar  conditions  existing  in  some  of  the  outlying  boroughs 
prior  to  consolidation.  The  arrears  of  personal  taxes  levied  prior 
to  1899  amount  to  $10,064,533.48,  and  probably  no  part  of  this 
can  ever  be  collected. 

From  1899  to  the  first  of  October,  1905,  the  total  arrears  of 
taxes  due  and  uncollected  is  $50,823,942.21.  This  amount  is  the 
uncollected  balance  after  deducting  the  total  discounts  and  the 
total  cancellations.  The  discounts  have  amounted  to  $2,567,- 
669.18,  and  the  cancellations  have  amounted  to  $7,052,800.60, 
making  a  total  sum  lost  to  the  City  through  discounts  and  can- 
cellations of  $9,620,469.78.  The  amount  provided  in  the  tax 
levies  of  the  years  1899  to  1904  for  deficiencies  in  the  product  of 
taxes  amounts  to  $9,974,415.72.  This  sum  exceeds  the  actual  loss 
through  discounts  and  cancellations  by  the  sum  of  $353.945-94- 
This  is  the  entire  provision  for  the  uncollectible  portion  of  the 
balance  of  uncollected  arrears  of  over  fifty  million  dollars. 

The  amount  of  the  uncollected  arrears  from  1899  is  appor- 
tioned as  follows : 

Personal  taxes $25,131,672  70 

Real  estate  11,323,602  31 

Special  franchise  taxes 14,368,667  20 

Total $50,823,942  21 


The  taxes  on  real  estate  amounting  to  over  eleven  million  dol- 
lars are  practically  all  collectible,  together  with  interest  at  the  rate 
of  7  per  cent,  from  the  time  the  taxes  became  due.  Of  the  tax 
on  special  franchises  amounting  to  over  fourteen  millions  there 
will  be  a  considerable  loss  on  account  of  the  taxes  for  the  years 
1900  to  1902.    This  is  occasioned  by  the  fact  that  the  Special 


II 

• 

Franchise  Tax  Law  requires  the  State  Board  of  Tax  Commis- 
sioners to  assess  special  franchises  at  their  full  value  while  other 
real  estate  was  not  assessed  as  the  law  directs.  When  proceedings 
were  brought  before  Judge  Earle  to  set  aside  the  assessments  as 
unconstitutional,  the  State  Tax  Commissioners  testified  that  they 
had  assessed  special  franchises  at  full  value,  and  evidence  was 
introduced  to  the  eflfect  that  the  real  estate  in  The  City  of  New 
York  was  assessed  at  about  two-thirds  of  full  value.  Judge  Earle 
in  his  opinion  said  that  "  these  assessments  will  have  to  be  reduced 
at  least  so  much  as  will  equalize  them  with  the  other  assessments 
in  the  same  localities." 


Method  of  Financing  the  City. 

For  over  thirty  years  the  plan  of  providing  the  City  Treasur>' 
with  current  funds  has  been  through  short  time  loans  on  what  are 
called  revenue  bonds  issued  in  anticipation  of  the  collection  of  the 
taxes  for  the  current  year.  It  is  not  contemplated  that  the  City 
will  have  any  current  funds  on  hand  on  the  first  of  January,  as 
the  taxes  of  the  preceding  year  will  have  been  used  to  retire  the 
bonds  sold  to  provide  funds  for  that  year.  When  taxes  are  paid 
in  October  these  bonds  are  retired,  and  by  the  first  of  January 
the  City  is  obliged  to  borrow.  The  charter  provides  that  revenue 
bonds  shall  be  issued  in  anticipation  of  the  collection  of  taxes, 
and  these  revenue  bonds  do  not  form  part  of  the  City  debt  until 
they  are  outstanding  for  over  five  years.  The  debt  is  limited  in 
amount  to  10  per  cent,  of  the  assessed  value  of  real  estate. 

In  view  of  this  general  plan  one  would  naturally  expect  that 
there  would  be  now  outstanding  revenue  bonds  to  the  total  amount 
of  the  uncollected  arrears  of  taxes,  and  that  these  bonds  would  be 
divided  according  to  their  date  of  issue  in  accordance  with  the 
amount  of  taxes  uncollected  for  each  of  the  years  for  which  there 
are  arrears  outstanding.  If  we  disregard  the  arrears  of  taxes 
levied  prior  to  consolidation  and  the  finances  of  the  City  had  been 
managed  as  one  would  suppose  from  reading  the  charter,  we 
should  have  had  the  following  condition  on  October  first,  1905 : 


12 

• 

Total  uncollected  taxes  for  the  years  1899  to  1904, 

inclusive    $50,823,942  21 

Less  the  unapplied  balances  of  the 
amounts  included  in  the  tax 
levies  for  deficiencies $353»945  94 

Less  also  unexpended  balances  of 
appropriations  for  the  years  1899 

to  1904,  inclusive 6,523,746  79 

6,877.692  73 

Balance  $43,946,249  48 


Revenue  bonds  issued  in  anticipation  of  the  taxes  for  the  years 
1899  to  1904  should  be  outstanding  to  the  amount  of  this  balance. 

The  actual  condition,  however,  is  far  different.    The  outstand- 
ing revenue  bonds  which  were  issued  in  anticipation  of  the  taxes 
for  these  years  are  actually  as  follows : 
Revenue  bonds  of  1902 $2,700,000 

"  •*  1903    2,100,000 

1904   5,200,000 

Total   $10,000,000 


— a  difference  of  $33,946,249.48.  The  question  now  arises,  where 
did  the  City  get  this  large  sum  of  money  by  the  use  of  which  it 
has  avoided  the  issuance  of  revenue  bonds,  and  why  has  this 
course  been  followed? 

The  funded  debt  of  The  City  of  New  York  is  incurred  by  the 
issue  of  what  is  called  the  corporate  stock  of  The  City  of  New 
York.  When  corporate  stock  is  authorized  to  be  issued  for  the 
purpose  of  providing  funds  to  pay  for  some  public  improvement, 
as  a  bridge,  park  or  the  like,  and  contracts  are  duly  entered  into 
by  the  City  for  the  performance  of  the  work  or  proceedings  are 
instituted  for  the  acquisition  of  land,  the  City  incurs  what  is 
called  a  contract  liability  or  land  liability  which  immediately 
counts  as  part  of  the  City  debt.  No  such  contract  liability  can 
be  incurred  until  the  issue  of  corporate  stock  is  authorized.   In  the 


13 

books  of  the  City  we  have  then  on  one  side  the  amount  of  the 
authorized  issue  of  corporate  stock,  and  on  the  other  side  the 
amount  of  the  contract  or  land  liability.  When  part  of  that  cor- 
porate stock  is  sold  and  a  corresponding  payment  is  made  on 
account  of  the  liability,  that  part  of  the  City's  debt  is  altered  from 
a  contract  or  land  liability  to  an  actual  indebtedness  evidenced 
by  the  corporate  stock  issued. 

At  all  times  there  are  a  great  many  contracts  in  course  of  per- 
formance for  which  payment  is  to  be  made  by  an  issue  of  corpo- 
rate stock.  It  is  obviously  impossible  for  the  City  to  issue  corpo- 
rate stock  for  the  amount  of  each  separate  contract  liability,  at 
the  time  when  payment  must  be  made,  to  the  amount  necessary  to 
make  the  payment.  In  practice,  therefore,  in  order  to  obtain  the 
best  terms  at  the  sale  of  corporate  stock  a  large  amount  of  corpo- 
rate stock  is  sold  at  one  time  for  the  account  of  a  number  of  dif- 
ferent contracts.  For  example,  a  sale  may  be  made  of  thirty 
millions  of  corporate  stock.  If  the  City  kept  this  money  on  hand 
for  the  account  of  the  different  purposes  for  which  the  issue  was 
made  until  payments  are  made  for  those  accounts,  the  City  would 
have  great  sums  on  hand  for  which  it  could  obtain  only  2  per  cent, 
from  City  depositories,  while  it  is  paying  3  per  cent,  or  more  for 
the  use  of  the  money,  and  at  the  same  time  is  obliged  to  borrow 
for  current  needs  on  revenue  bonds  at  a  rate  of  interest  varying 
from  2^  to  5  per  cent. 

Instead  of  carrying  this  large  sum  in  City  depositories  to  the 
credit  of  the  different  accounts  for  which  the  corporate  stock  was 
issued,  the  money  when  rceived  is  deposited  to  the  credit  of  a 
general  fund  of  the  City,  in  which  is  also  deposited  the  proceeds 
of  such  revenue  bonds  as  may  be  sold  and  the  money  received 
from  current  tax  levies,  assessments,  excise  taxes,  etc.  The  City 
then  having  put  its  money  from  all  these  sources  into  one  general 
fund  it  uses  this  fund  to  retire  revenue  bonds  and  to  pay  current 
exi>enses  as  well  as  to  make  the  necessary  payments  on  account 
of  the  contract  liabilities  as  they  become  due. 

By  this  practice,  instead  of  having  $43,000,000  in  revenue 
bonds  outstanding  upon  which  interest  must  be  paid  at  a  rate  aver- 
aging over  3^  per  cent.,  and  having  a  bank  balance  in  excess  of 


II! 


I 


14 

the  actual  balance  in  the  banks  of  over  $33,000,000,  upon  which 
the  City  would  only  obtain  2  per  cent,  interest,  the  City  has  had 
a  small  balance  in  the  bank  and  has  borrowed  at  a  lower  rate  on 
its  corporate  stock  than  it  could  have  borrowed  upon  short  time 
revenue  bonds. 

To  express  this  practice  in  simple  language  it  may  be  said  that 
the  City  borrows  from  its  own  funds  provided  for  special  contract 
purposes  in  order  to  meet  its  current  expenses.  While  this  prac- 
tice has  been  successfully  pursued  to  the  present  time  and  has  been 
productive  of  a  large  saving  to  the  City,  it  can  only  continue  to  be 
pursued  so  long  as  the  funds  derived  from  the  proceeds  of  the  sale 
of  corporate  stock  and  the  other  funds  are  not  actually  required 
for  their  respective  purposes.  It  has  been  shown  that  the  debt  of 
the  City  is  annually  increasing  at  the  rate  of  three  millions  of 
dollars  a  year  because  of  the  failure  to  collect  the  total  amount  of 
taxes  levied.  The  City  is  not  paying  its  way  year  by  year,  but  is 
borrowing  from  the  future  for  airrent  expenses.  In  the  process 
it  has  accumulated  a  very  considerable  indebtedness  on  account 
of  uncollectible  taxes. 

Having  explained  the  conditions  that  exist  we  are  now  con- 
fronted with  the  problem  of  existing  arrears  of  uncollectible  taxes 
and  of  the  annual  deficiency  which  will  continue  to  increase  unless 
provision  is  made  for  the  future.  ^ 

Existing  DeHciency  Caused  by  Arrears  of  Uncollectible  Taxes. 

We  have  already  shown  the  total  amount  of  the  arrears  of 
taxes,  a  part  of  which  is  uncollectible.  The  amount  which  is  uncol- 
lectible is  too  large  to  raise  by  taxation  in  any  one  year,  and  in 
order  to  make  good  the  deficiency,  provision  must  be  made  for 
the  issuance  of  corporate  stock  to  the  amount  of  the  existing 
arrears  which  are  uncollectible.  The  records  of  the  receiver  of 
taxes  and  of  the  Law  Department  contain  sufficient  data  to  de- 
termine with  almost  absolute  accuracy  the  exact  amount  of  the 
arrears  that  are  uncollectible ;  but  even  without  a  thorough  inspec- 
tion of  the  records  of  these  departments  an  estimate  may  be  made 
which  will  be  sufficiently  accurate  for  the  purposes  of  this  report. 
It  may  be  said  with  certainty  that  practically  all  the  arrears  of 


IS 

personal  taxes  levied  prior  to  1899  are  uncollectible,  and  that  all 
personal  taxes  levied  from  1899  to  1903  which  ^are  in  arrears  are 
uncollectible.  The  loss  on  account  of  special  franchise  taxes  for 
the  years  1900  to  1902  will  not  exceed  one-third  of  the  levy, 
and  from  this  nuist  be  deducted  the  amount  already  canceled 
which  is  offset  by  deficiency  items.  The  total  amount  is  reduced 
by  the  balance  of  the  amount  provided  for  deficiencies.  The 
amount  of  uncollectible  arrears  is  therefore  about  as  follows : 

Uncollected  personal  taxes  levied  prior  to  1899. .  $10,064,533  4^ 
Uncollected  personal  taxes  levied  from   1899  to 

1903    20,587.598  17 

One-third  of  the  special  franchise 

taxes  of  1900,  1901  and  1902.  .  $4,981,382  29 
Less  amount  of  cancellations. . . .     1,488,395  05 

3,492,987  24 


$34,145,118  89 
Less  balance  of  amount  provided  for  deficiencies 

in  prior  tax  levies 353-945  94 


Total   ....*. $33,791,172  95 


The  Committee  therefore  proposes  the  passage  of  an  act 
which  shall  require  the  Board  of  Estimate  and  Apportionment 
to  authorize  the  issue  of  corporate  stock  of  The  City  of  New 
York  to  an  amount  equal  to  so  much  of  the  deficiency  on  the  first 
day  of  January,  1905,  in  the  product  of  taxes  theretofore  levied 
and  deemed  by  the  Board  to  be  uncollectible,  as  shall  not  have 
been  provided  for  in  prior  tax  levies  or  by  the  authorization  of 
the  issue  of  corporate  stock  of  The  City  of  New  York. 

It  is  to  be  noted  that  the  Committee  does  not  propose  to 
require  the  immediate  issue  of  the  corporate  stock  authorized. 
It  will  not  be  necessary  to  issue  all  that  is  authorized  until  the 
needs  of  the  city  shall  demand  it.  The  issue  may  be  distributed 
over  several  years  if  sufficient  funds  are  on  hand  to  meet  pay- 
ments as  they  fall  due. 


It 


16 

On  the  average  The  City  of  New  York  spends  every  month 
more  than  eight  piiilion  dollars  for  ordinary  purposes,  and  four 
or  five  millions  on  account  of  permanent  improvements,  so  that 
even  should  the  Comptroller  find  it  expedient  to  issue  at  one  time 
the  whole  amount  of  bonds  authorized,  the  proceeds  would  pay 
the  city  bills  for  only  two  or  three  months.  In  view  of  the  ex- 
isting deficit  in  the  funds  provided  for  permanent  improvements 
the  money  at  the  command  of  the  Comptroller  will  not  be  exces- 
sive. 

THE  ANNUAL  DEFICIENCY. 

The  existing  law  to  provide  against  an  accumulation  of  arrears 
is  inadequate,  as  has  already  been  shown ;  it  is  contained  in  sec- 
tion 248  of  the  Charter,  by  which  the  Board  of  Aldermen  is 
directed  to  include  in  any  ordinance  imposing  and  levying  taxes 
such  sum  as  the  Board  shall  deem  necessary,  not  to  exceed  three 
per  centum,  to  provide  for  deficiencies  in  the  actual  product  of 
the  amount  of  taxes  imposed  and  levied.  The  arrears  exceed 
three  per  cent.,  so  that  this  power  is  insufficient ;  moreover,  it  is 
made  the  duty  of  the  Board  to  make  an  estimate  as  to  the  future. 
It  is  far  better  to  deal  with  known  quantities  than  with  future 
estimates,  and  by  the  amendment  we  propose  all  arrears  will  be 
provided  for  annually  in  the  Budget. 

By  chapter  639  of  the  Laws  of  1905  an  attempt  was  made  to 
provide  for  the  deficiency  in  the  collection  of  personal  taxes,  by 
amending  section  169  of  the  Charter.  The  amendment  provides 
that  corporate  stock  of  The  City  of  New  York  shall  be  issued  to 
the  amount  of  personal  taxes  in  arrears  for  five  years.  This  pro- 
vision is  inadequate  in  that  it  does  not  provide  for  the  deficiency 
caused  by  the  uncollectible  taxes  on  real  estate.  The  amendment 
is  undesirable  because  it  provides  for  a  continuous  increase  in  the 
indebtedness  of  the  City,  by  the  amount  of  uncollected  personal 
taxes ;  it,  moreover,  fixes  a  standard  of  uncertain  character.  In- 
stead of  providing  for  taxes  which  are  uncollectible,  it  provides 
for  all  which  are  five  years  in  arrears,  which  may  or  may  not  be 
uncollectible.  It  is  proposed,  therefore,  to  repeal  the  amendment 
to  section  169  of  the  Charter,  adopted  in  1905. 


17 

Section  230  sets  forth  the  mandatory  items  to  be  included  in 
the  annual  estimate.  It  is  proposed  to  amend  this  section  by 
requiring  the  Board  of  Estimate  to  include  in  its  final  estimate  a 
sum  equal  to  so  much  of  the  deficiency,  on  the  preceding  ist  day 
of  January,  in  the  product  of  taxes  theretofore  levied  and  deemed 
by  the  Board  to  be  uncollectible,  as  shall  not  have  been  provided 
for  in  prior  tax  levies  or  by  the  authorization  of  the  issue  of 
corporate  stock  of  The  City  of  New  York. 

By  the  passage  of  the  act  providing  for  the  issue  of  corporate 
stock  to  supply  the  uncollectible  deficiency  in  the  product  of  taxes 
outstanding  January  i,  1905,  all  arrears  on  that  date  will  be 
funded.  The  proposed  amendment  to  section  230  adheres  to  the 
same  language,  so  that  there  will  be  an  annual  clearance  of  all 
uncollectible  arrears,  and  an  erroneous  estimate  of  one  year  will 
be  corrected  the  following  year. 

In  October,  1906,  the  Board  of  Estimate  will  include  in  the 
Budget  all  uncollectible  arrears  as  the  same  shall  be  on  January  i, 
1906,  and  annually  thereafter  the  amount  of  all  uncollectible  taxes 
outstanding  on  the  first  of  the  year  must  be  provided  for  in  the 
budget. 

Section  248,  being  superseded,  will  be  repealed  after  the  de- 
ficiency item  is  added  to  the  tax  levy  for  1906. 

WHAT  TAXES   ARE  UNCOLLECTIBLE. 

The  question  has  been  considered  whether  it  is  desirable  to 
define  just  what  taxes  are  uncollectible,  or  to  leave  this  deter- 
mination to  the  Board  of  Estimate,  and  the  conclusion  has  been 
reached  that  it  is  best  to  leave  this  administrative  detail  to  the 
Board  without  definite  instructions.  The  Comptroller  is  a  member 
of  the  Board,  and  the  Receiver  of  Taxes  is  a  subordinate  of  the 
Comptroller.  The  Receiver  of  Taxes  has  records  which  furnish 
most  of  the  information  necessary.  The  additional  information 
required  can  be  obtained  from  the  Corporation  Counsel,  who  is 
required  to  advise  the  Board  of  Estimate  or  any  officer  of  the 
City. 


.» 


l8 

Taxes  on  Real  Estate. 

Taxes  on  real  estate  are  uncollectible  when  assessments  are 
reduced,  or  in  the  case  of  exempt  property  vacated,  by  judicial  de- 
cision, or  by  the  action  of  the  tax  commissioners.  When  such 
decisions  are  rendered  an  order  is  served  upon  the  receiver  of 
taxes  and  his  records  show  the  amount  of  the  tax  lost. 

Taxes  on  Personal  Property. 

There  is  a  large  amount  of  taxes  on  personal  property  which 
is  uncollectible.  The  fact  that  such  taxes  are  uncollectible  can  in 
most  cases  be  ascertained  with  certainty.  The  facts  appear  in 
the  following  ways : 

First — All  taxes  on  personal  property  for  the  collection  of 
which  no  action  has  been  commenced  within  the  time  limited  by 
section  934  are  outlawed  and  uncollectible.  When  the  attorney 
for  the  collection  of  arrears  is  satisfied  by  sufficient  evidence  that 
the  person  assessed  has  no  property  liable  to  execution,  actions 
are  not  pressed.  The  records  of  the  Bureau  for  the  Collection  of 
Arrears  of  Personal  Taxes  show  such  cases. 

Second — All  cases  in  which  the  assessment  has  been  reduced 
or  vacated  by  judicial  decision.  This  may  happen  in  four  ways: 
When  the  assessment  has  been  vacated  or  reduced  as  a  result  of  a 
review  of  the  action  of  the  Tax  Commissioners  upon  a  writ  of 
certiorari ;  when  the  assessment  has  been  vacated  because  the  per- 
son assessed  was  a  non-resident ;  when  pursuant  to  an  offer  of  judg- 
ment a  part  of  the  tax  has  been  accepted  as  payment  in  full;  when 
pursuant  to  section  934  of  the  Charter  or  section  259a  of  the  Tax 
Law  an  order  has  been  entered  remitting  part  or  all  of  the  tax. 

Third — ^All  cases  in  which  the  tax  has  been  remitted  or  re- 
duced by  the  tax  commissioners  after  the  delivery  of  the  tax 
rolls  to  the  receiver  of  taxes. 

Fourth — Taxes  for  the  collection  of  which  actions  have  been 
brought,  judgments  obtained,  executions  issued  and  returned  un- 
satisfied. These  cases  offer  about  the  only  element  of  uncertainty, 
for  a  judgment  is  good  for  twenty  years,  and  although  worthless 
at  present,  it  may  sometime  have  a  value.    At  the  same  time  a 


19 

chance  of  anything  ever  being  collected  on  such  judgments  is  very 
remote. 

It  will  be  observed  that  all  the  facts  necessary  to  determine 
whether  taxes  on  personal  property  are  collectible  or  not  are 
within  the  knowledge  of  the  Corporation  Counsel  and  Receiver  of 
Taxes. 


I 


p 


i*. 


; 


20 

Method  of  Compiiting  the  City  Debt. 

In  order  that  the  financial  methods  of  the  City  may  be  better 
understood  in  connection  with  this  report  we  present  the  follow- 
ing summary  of  the  manner  of  computing  the  debt  of  the  City 
for  the  purpose  of  determining  its  borrowing  capacity  or  margfin 
for  incurring  further  indebtedness.  The  borrowing  capacity  is 
arrived  at  as  follows : 

From  the  10  per  cent,  of  the  assessed  valuation  of  real  estate 
for  purposes  of  taxation  there  is  deducted : 

1st.  The  net  funded  debt.  • 

2nd.  The  liability  incurred  by  the  City  on  account  of  contracts 
entered  into,  in  excess  of  the  credit  balances  in  the 
funds  or  accounts,  applicable  to  such  contracts. 

3rd.  The  liability  incurred  by  the  City  for  lands  acquired  in 
excess  of  the  credit  balances  in  the  funds  applicable 
thereto. 

4th.  The  liability  of  the  City  for  judgments  against  the  corpo- 
ration. 

5th.  Revenue  bonds  issued  in  any  year  for  account  of  taxes 
levied  in  prior  years. 


: 


Net  Funded  Debt. 

The  gross  funded  debt  includes  all  stocks  and  bonds  except 
revenue  bonds  issued  in  anticipation  of  taxes.  The  net  funded 
debt  is  arrived  at  by  subtracting  from  the  gross  funded  debt 
the  amount  of  the  various  county  debts  and  also  the  amount  of 
the  gross  funded  debt  held  by  the  Commissioners  of  the  Sinking 
Fund  for  investment  for  account  of  the  various  sinking  funds. 

Contract  Liability. 

The  liability  on  contracts  is  arrived  at  by  deducting  from  the 
estimated  cost  of  the  several  contracts,  the  payments  made  on 
account  and  the  balance  to  the  credit  of  the  fund  or  account  pro- 
vided for  the  liquidation  of  each  contract  liability.  The  balance 
then  remaining  is  treated  as  indebtedness  on  account  of  contracts. 


21 

Land  Liability. 

The  liability  for  lands  acquired  includes  all  property,  the  title 
to  which  has  vested  in  the  City,  but  which  has  not  been  paid  for. 
The  cost  is  estimated  where  actual  figures  are  not  obtainable  and 
the  estimate  is  usually  based  upon  tax  valuations  furnished  at  the 
time  when  the  proceeding  to  acquire  the  property  is  authorized  by 
the  Board  of  Estimate  and  Apportionment.  From  such  estimated 
cost,  or  actual  cost  where  it  is  known,  there  are  deducted  the  bal- 
ances standing  to  the  credit  of  the  accounts  or  funds  ultimately 
chargeable  with  the  obligation.  If  a  fund  or  account  is  chargeable 
with  contract  liability,  as  well  as  land  liability,  the  balance  to  the 
credit  of  the  fund  is  first  applied  on  account  of  the  contract  lia- 
bility and  the  surplus,  if  any,  applied  in  reduction  of  the  land 
liability.  The  balances  thus  arrived  at  are  treated  as  liability  for 
lands  acquired. 


Liability  for  Judgments. 

The  estimated  amount  of  $2,000,000  is  usually  carried  as  in- 
debtedness on  account  of  judgments,  this  being  considered  a  very 
liberal  estimate. 


Revenue  Bonds. 

Revenue  bonds  issued  in  anticipation  of  the  collection  of  taxes 
for  years  prior  to  the  years  of  issue  are  treated  as  debt.  The  Con- 
stitution provides : 

"  This  section  shall  not  be  construed  to  prevent  the  issuing  of 
certificates  of  indebtedness  or  revenue  bonds  issued  in  anticipation 
of  the  collection  of  taxes  for  amounts  act^ially  contained  or  to  be 
containing  in  the  taxes  for  the  year  when  such  certiHcates  or 
revenue  bonds  are  issued  and  payable  out  of  such  taxes." 


22 

Report  as  to  the  Propriety  of  a  Change  in  the  Time  of 

Collecting  Taxes. 

Your  Committee  presents  a  report  made  by  Ur.  Bell  upon  the 
bill  introduced  in  the  Legislature  of  1905.  by  which  it  was  sought 
to  advance  the  date  for  the  payment  of  taxes  in  order  to  obviate  ' 
the  necessity  for  borrowing  money  in  anticipation  of  the  collection 
of  taxes.     It  is  not  necessary  for  the  Committee  to  express  an 
opinion  upon  the  merits  of  this  particular  bill,  for  the  reason  that 
after  careful  consideration  of  the  whole  subject  your  Committee 
is  convinced  that  it  is  not  desirable  to  change  the  present  method 
of  providing  current  funds  for  the  City's  needs.  Briefly  described, 
the  present  plan  is  this :    The  City  starts  the  fiscal  year  on  the  first 
of  January  with  practically  no  money,  and  receives  no  income 
until  the  first  of  October,  when  taxes  are  payable. "  During  this 
time  the  City  is  authorized  to  borrow  on  short  time  revenue  bonds 
to  meet  current  expenses,  these  bonds  being  issued  in  anticipation 
of  the  collection  of  the  taxes  for  the  current  year.    These  bonds 
are  not  a  charge  against  the  City's  debt  limit.     Under  ordinary 
circumstances  the  City  pays  from  2>^  to  4  per  cent,  interest  on 
these  short  time  loans,  though  in  exceptional  times  of  tight  money 
the  City  has  to  pay  a  higher  rate. 

Those  who  object  to  this  method  of  financing  the  City  contend 
that  it  is  wasteful  and  costly  for  the  City  to  live  on  borrowed 
money  for  its  current  needs,  because  of  the  amount  of  interest 
that  has  to  be  paid,  which  is  a  charge  upon  the  taxpayers.    It  is 
moreover  often  assumed  that  this  condition  is  the  result  of  care- 
lessness and  extravagance  in  past  years,  and  not  of  any  carefully 
planned  system.     The   fact  is,  however,  that  this  method  was 
adopted  after  due  consideration  for  what  your  Committee  believes 
to  be  good  and  sufficient  reasons.    Under  the  present  method  there 
is  not  at  any  time  in  the  City  Treasury  a  sum  of  money  in  excess 
of  the  balance  which  the  City  should  have  on  hand,  whereas  under 
any  plan  which  would  obviate  the  necessity  for  borrowing  there 
.would  be  large  sums  in  the  City  Treasury  far  in  excess  of  its 
necessities.     Upon  such  large  sums  the  City  could  not  obtain  a 
high  rate  of  interest.    Ordinarily  it  receives  2  per  cent,  upon  its 
deposits  in  city  banks  and  trust  companies.     While  the  City  has 
been  fortunate  in  having  men  of  thorough  integrity  and  great 


23 

ability  at  the  head  of  the  Finance  Department,  the  Committee 
does  not  deem  that  it  is  wise  to  count  too  confidently  upon  there 
never  being  an  exception  to  that  condition,  and  put  upon  the 
Comptroller  and  Chamberlain  the  burden  of  caring  for  larger 
sums  of  money  at  any  one  time  than  is  necessary.  Indeed,  the 
Comptroller  and  Chamberlain  would  have  difficulty  in  properly 
placing  fifty  millions  of  dollars  or  more  which  they  might  have 
on  hand  in  case  the  City  were  relieved  of  the  necessity  of  borrow- 
ing for  current  needs.  It  is  clear  that  the  burden  of  caring  for 
so  large  a  sum  would  be  onerous,  and  the  temptation  to  grant 
favors  by  the  disposition  of  deposits  would  be  severe. 

The  Committee  has  fairly  faced  the  only  argument  advanced, 
which  is  that  if  the  City  were  not  obliged  to  borrow,  the  sum  now 
paid  as  interest  would  be  saved  to  taxpayers.  This  argument 
appears  to  be  without  merit.  The  only  source  from  which  the 
City  can  obtain  current  moneys  is  the  payment  of  taxes.  If  tax- 
payers provide  a  sum  sufficiently  large  to  obviate  the  necessity 
for  borrowing,  the  taxpayers  lose  the  use  of  the  money  so  ad- 
vanced, which  presumably  in  any  state  of  the  money  market  is 
worth  more  to  taxpayers  than  the  interest  which  the  City  could 
obtain  for  deposits  in  banks  and  trust  companies.  Thus  under 
ordinary  circumstances  the  City  pays  for  loans  3  per  cent,  or  3^ 
per  cent,  and  obtains  2  per  cent,  upon  its  deposits.  Under  such 
conditions  the  money  is  certainly  worth  more  to  the  taxpayers,  as 
a  rule,  than  the  3  per  cent,  or  33^  per  cent,  which  the  City  is 
obliged  to  pay.  If,  on  the  other  hand,  the  conditions  of  the  money 
market  are  such  that  the  City  is  obliged  to  pay  the  highest  rate 
of  interest,  under  these  conditions  again  the  money  is  worth  more 
to  the  taxpayers,  for  such  use  as  they  can  make  of  it,  than  the 
sum  the  City  has  to  pay  in  interest. 

These  considerations  and  perhaps  others  were  undoubtedly  in 
the  minds  of  those  who  devised  the  system  under  which  The  City 
of  New  York  has  been  financed  for  thirt>'  years  and  more.  With- 
out regard  to  the  merit  of  any  particular  plan  which  may  be  ad- 
vanced for  obviating  the  necessity  of  borrowing  in  anticipation  of 
the  collection  of  taxes,  the  Committee  believes  that  the  present 
plan  is  the  best  which  can  be  devised  under  all  the  circumstances 
as  they  now  exist. 


i 


24 

Report  of  Mr.  Bell  Upon  the  Bill  to  Advance  the  Date 

for  Payment  of  Taxes. 

G.  O.  No.  32.  Senate  Bill  No.  118,329.    Int.  103. 

An  Act  to  Amend  the  Greater  New  York  Charter,  as  Amended 
by  Chapter  466  of  the  Laws  of  1901,  and  Subsequent 
Amendments  Thereto,  Relative  to  Levying  Taxes  and  the 
Collection  Thereof. 

objections. 
This  bill  seeks,  through  amendments  to  twenty-seven  sections 
of  chapter  466  of  the  Laws  of  1901  (Greater  New  York  Charter), 
to  so  change  the  law  relating  to  assessments  and  taxation  that 
taxes  now  due  and  payable  on  the  first  Monday  in  October  of  each 
year  may  be  paid  on  the  first  Monday  in  January  of  the  same 
year,  thus  advancing  the  collection  of  taxes  nine  months-the  ob- 
ject sought  by  this  advancement  being  to  do  away  with  the  present 
necessity  of  issuing  short  term  bonds  in  anticipation  of  the  collec- 
tion of  the  tax  revenue. 

If  the  object  could  be  attained  by  this  bill  the  estimated  saving 
in  interest  would  be  about  $1,500,000  each  year. 

The  plan  of  the  bill,  however,  is  so  radically  defective  that  it 
ought  not  to  become  a  law. 

The  plan  of  the  bill  proceeds  upon  the  theory  that  the  only  way 
to  advance  the  payment  of  taxes  nine  months  is  to  arbitrarily  do 
away  with  the  field  work,  revision,  hearings  and  other  details  hith- 
erto and  under  existing  law  deemed  essential  to  a  just  and  legal 
assessment. 

To  secure  this  arbitrary  assessment  the  duplicate  of  the  1906 
roll  is  to  be  "  used  as  the  basis  for  determining  the  amount  of 
tax  to  be  levied  on  real  and  personal  estate  of  the  several  boroughs 
for  the  year  1907  (section  892a)." 

The  books  containing  these  duplicate  assessments  are  to  be 
open  for  public  inspection,  examination  and  correction  from  the 
second  Monday  in  January  to  the  first  day  of  April,  1906.  On 
the  last-named  day  the  books  "  shall  be  closed,  to  enable  the 


2$ 

Board  of  Taxes  and  Assessments  to  prepare  assessment  rolls  of 
the  several  boroughs  for  delivery  to  the  Board  of  Aldermen  " 
(section  892). 

During  the  months  of  April  and  May  the  Commissioners  may 
act  upon  applications,  take  testimony,  examine  applicants  for  the 
reduction  of  assessments,  provided  such  applications  were  filed 
prior  to  the  thirty-first  day  of  March  preceding  (section  895, 
New  York  Charter). 

Section  2  of  the  new  bill  provides : 

"  Nothing  in  this  act  contained  shall  be  deemed  or 
construed  as  repealing  or  amending  any  of  the  sections  of 
the  Greater  New  York  Charter,  as  amended  by  chapter 
466  of  the  Laws  of  190 1,  in  so  far  as  they  in  any  way  relate 
to  the  making  of  the  budget,  and  also  the  annual  record 
of  assessed  valuations  of  the  real  and  personal  estate  of 
the  several  boroughs  on  which  the  taxes  for  the  year  1905 
and  1906  are  to  be  determined,  nor  is  it  to  affect  in  any  way 
the  levying  or  collection  of  the  taxes  for  said  years  1905 
and  1906,  but  the  said  budget  and  annual  records  for  said 
years  shall  be  prepared  and  the  levying  and  collection  of 
the  taxes  for  said  years  shall  proceed  in  the  manner  now 
provided  by  law  and  as  if  the  act  had  not  been  passed." 

As  the  act  is  to  take  effect  on  the  first  day  of  June,  1905,  it 
is  clear  that  the  reservation  in  section  2,  above  quoted,  applies 
only  to  the  assessments  and  taxes  for  the  years  1905  and  1906. 

It  would  appear  equally  clear  that  the  only  specific  reservation 
of  the  old  law  affecting  the  duplicate  roll  for  1907  is  that  pro- 
vided for  in  the  new  section  892a,  as  follows: 

"  Both  of  said  records  (1906-1907)  shall  be  subject  to 
the  provisions  contained  in  section  892  of  this  act,  except 
that  the  said  records  shall  remain  open  for  pubHc  inspec- 
tion, examination  and  correction  from  the  second  Monday 
in  January  until  the  first  day  of  April  in  said  year,  1906. 
The  second  or  duplicate  record  shall  be  used  as  the  basis 
for  determining  the  amount  of  tax  to  be  levied  on  real  and 
personal  estate  of  the  several  boroughs  for  the  year  1907." 


fc 


26 

Section  2  provides  that: 

"  The  annual  record  of  assessed  valuations  for  the  taxes 
to  be  levied  for  the  year  1907  shall  be  subject  to  the  same 
changes  and  corrections  as  the  annual  record  of  assessed 
valuations  for  the  taxes  to  be  levied  for  the  year  1906; 
such  corrections  and  changes  shall  be  made  within  the 
same  period,  at  the  same  time  and  in  the  same  manner  on 
each  of  said  records;  provided,  however,  that  if  it  shall  be 
found  necessary,  by  reason  of  changes  in  valuations  of 
real  and  personal  property  subsequent  to  the  preparation 
of  said  annual  record,  to  make  additional  changes  or  cor- 
rections, that  such  additional  changes  0/  corrections  may 
be  made  at  any  time  prior  to  the  first  of  September,  1906, 
but  no  increase  in  valuations  by  reason  of  said  changes 
shall  be  made,  except  upon  notice  given  to  the  individual 
or  corporation  affected  by  such  increase,  at  least  ten  days 
before  the  fifteenth  day  of  August  of  said  year." 

From  this  it  may  be  fairly  construed  that  the  duplicate  rolls 
for  1907  are  open  for  public  inspection,  examination  and  cor- 
rection from  the  second  Monday  of  January  until  the  first  day  of 
April,  1906,  as  provided  in  amended  section  892a  of  the  new  bill, 
and  that  under  section  2  of  the  act  parties  assessed  thereon  may 
be  heard  by  the  Commissioners  during  April  and  May  upon 
appHcations  for  reduction  of  assessments  upon  either  real  or 
personal  property  filed  in  their  offices  on  or  before  the  31st  day 
of  March,  1906. 

The  proviso  in  section  2— that  changes  and  corrections  may 
be  made  in  the  rolls  of  1907  at  any  time  prior  to  the  first  day  of 
September,  1906,  if  "  found  necessary  by  reason  of  changes  in 
valuations  of  real  and  personal  property  subsequent  to  the  pre- 
paration of  said  annual  record,"  can  hardly  be  construed  as 
authorizing  the  addition  of  new  names  or  new  entries  upon 
the  rolls  for  1907,  after  the  first  day  of  April,  or  any  hearing 
whatever,  to  those  assessed  on  said  rolls,  except  to  those  whose 
assessments  are  to  be  increased.  Taxpayers  in  this  class  are 
entitled  to  notice,  and,  consequently,  may  be  heard  on  such 
notice  at  any  time  prior  to  September  i,  1906.    The  vast  majority 


27 

of  the  property-owners  assessed  on  the  1907  rolls,  for  no  better 
reason  than  that  they  were  liable  on  the  rolls  for  1906,  have  no 
opportunity  to  be  heard  under  this  bill.  Their  real  estate  in  1907 
may  be  less  in  value  than  in  1906,  because  of  the  destruction  of 
the  improvements  thereon  or  for  other  reasons.  Their  personal 
property  liable  in  1906  may  have  been  lost,  sold  or  converted 
into  non-taxable  property  during  that  year,  yet  under  this  bill 
they  have  no  opportunity  to  establish  the  facts,  as  no  public 
inspection  or  examination  of  the  rolls  for  1907  after  March  31. 
1906,  is  provided  for,  either  through  personal  notice  (except  in 
increase  cases)  or  by  publication  in  the  newspapers  or  the 
City  Record,  as  now  required  by  law. 

This  deprivation  of  the  right  of  property-owners  to  be  heard 
on  their  assessments  before  they  ripen  into  a  tax  is  a  violation  of 
a  fundamental  right  guaranteed  by  the  State  Constitution. 

The  authorities  relied  upon  to  support  this  conclusion  are 
numerous.  Some  of  the  leading  ones  are  included  in  and  com- 
mented upon  in  the  case  of  Stuart  vs.  Palmer,  74  N.  Y.,  183.  In 
that  case  the  Court  says: 

"  The  Legislature  can  no  more  arbitrarily  impose  an 
assessment  for  which  property  may  be  taken  and  sold  than 
it  can  render  a  judgment  against  a  person  without  a  hear- 
ing.   It  is  a  rule  founded  on  the  first  principles  of  natural 
justice,  older  than  written  constitutions,    that    a    citizen 
shall  not  be  deprived  of  his  life,  liberty  or  property  with- 
out an  opportunity  to  be  heard  in  defense  of  his  rights, 
and  the  constitutional  provision  that  no  person  shall  be 
deprived  of  these 'without  due  process  of  law  '  has  its  foun- 
dation in  this  rule.     The  provision  is  the  most  important 
guaranty  of  personal  rights  to  be  found  in  the  Federal  or 
State  Constitution.      It    is   a   limitation    upon    arbitrary 
power  and  is  a  guaranty  against   arbitrary   legislation. 
No    citizen    shall    arbitrarily    be    deprived    of    his    life, 
liberty  or  property.     This  the   Legislature   can   not   do 
or  authorize  to  be  done.     '  Due  process  of  law '  is  not 
confined  to  judicial  proceedings,  but  extends  to  every  case 
which  may  deprive  a  citizen  of  life,  liberty  or  property, 


f 


28 


29 


t 


4 


I 


whether  the  proceedings  be  judicial,  admin  strati  ve  or 
executive  in  its  nature  (Weimer  z's.  Bruienbury,  30  Mich., 
201).  This  great  guaranty  is  always  and  everywhere 
present  to  protect  the  citizen  against  arbitrary  interference 
with  these  sacred  rights." 

This  arbitrary  feature  of  the  bill,  growing  out  of  the  duplicate 
roll  plan,  which  necessarily  creates  a  tax  liability  for  1907  during 
the  year  1906,  and  before  the  tax  for  1906  is  due  and  payable,  is 
so  unjust,  that  no  plea  of  expediency  can  justify  its  adoption,  and 
its  presence  as  the  basic  principle  in  the  McCarren  bill  should  be 
fatal  to  its  enactment. 

The  objections  to  the  bill  may  be  summarized  as  follows: 

1.  The  duplicate  roll  plan  is  open  to  serious  objections.  No 
provision  is  made  for  the  public  inspection,  examination  and  cor- 
rection of  the  rolls  of  1907,  except  at  the  time  when  the  books  of 
annual  record  are  open  for  public  inspection,  examination  and 
correction  of  the  assesments  for  1906.  As  all  property-owners 
outside  of  New  York  have  an  opportunity  to  be  heard  on  assess- 
ments against  them  for  the  year  1907,  failure  to  grant  this  right 
in  the  pending  bill  is  an  unjust  discrimination  against  the  prop- 
erty-owners of  Greater  New  York. 

2.  Changing  the  period  for  field  work  from  September, 
October,  November  and  December  to  January,  February,  March 
and  April  is  objectionable.  It  is  transferring  important  outdoor 
work  from  the  best  to  the  worst  months  (except  April)  in  the 
year.  January,  February  and  March  are  usually  cold,  wintry 
months.  With  snow  on  the  ground  it  would  be  difficult  to  trace 
boundary  lines  or  identify  stakes  or  monuments,  while  the  low 
temperature  would  materially  interfere  with  the  work  of  recording 
data  in  the  books  carried  by  the  deputies.  The  necessary  work 
could  not  be  properly  done  in  these  months. 

3.  Changing  the  "  grievance  "  period  from  the  second  Mon- 
day of  January  to  April  i  in  each  year — to  May  i  to  July  i — is 
unwise.  Taken  in  connection  with  the  period  for  hearings 
(April  and  May),  on  applications  for  reductions,  filed  prior  to  the 
closing  of  the  books  on  April  i,  and  the  change  proposed  in  this 


bill,  confining  such  work  to  July  and  August,  we  shall  have  the 
hottest  months  of  the  year  for  the  most  important  work  of  the 
Department,  making  necessary  the  presence  of  the  taxpayer  and 
those  representing  his  interests  at  a  time  when,  usually,  they  are 
out  of  the  city  for  needed  recreation  and  health. 

4.  By  advancing  the  time  for  paying  taxes  on  the  plan  pro- 
posed, the  loss  from  the  rolls  for  1907  would  be — loss  of  the 
natural  increment  of  values  due  to  growth  and  improvements  for 
1906 — at  least  $100,000,000. 

Loss  from  new  estates,  new  residents  and  newly-organized 
corporations  for  the  same  year,  $100,000,000. 

Loss  of  the  Special  Franchise  for  1907,  estimated  at 
$375»ooo»ooo- 

Estimated  total  loss  of  assessments  to  the  tax  rolls  of  1907, 
$575,000,000,  or,  at  present  rates,  a  loss  in  taxes  of  $8,702,165. 

5.  Amended  section  900  of  the  new  bill  makes  it  obligatory 
on  the  part  of  the  Comptroller  "  to  prepare  and  submit  to  the 
Board  of  Aldermen,  at  least  two  weeks  before  its  annual  meeting 
in  each  and  every  year,  for  the  purpose  of  imposing  the  annual 
taxes,  a  statement  setting  forth  the  amounts  by  law  authorized  to 
be  raised  by  tax."  He  is  required  to  give  "  an  estimate  of  the 
probable  amount  of  receipts  into  the  City  Treasury  during  the 
fiscal  year  next  succeeding  from  all  the  sources  of  revenue  of 
the  general  funds,  including  surplus  revenue  from  the  sinking 
funds  of  the  Mayor,  Aldermen  and  Commonalty  of  The  City  of 
New  York,  other  than  the  surplus  revenues  of  any  such  sinking 
funds  for  the  payment  of  interest  on  the  City  debt  of  the 
municipal  corporation  known  as  The  Mayor,  Aldermen  and 
Commonalty  of  The  City  of  New  York,  or  the  like  debts  of  the 
municipal  and  public  corporations  by  this  act  consolidated 
as  aforesaid,  and  the  said  Board  of  Aldermen  is  hereby  author- 
ized and  directed  to  deduct  the  amount  of  such  estimated  receipt 
from  the  aggregate  amount  of  all  the  various  sums  which,  by 
law,  they  are  required  to  order  and  cause  to  be  raised  by  tax  for 
the  purposes  aforesaid,  and  to  cause  to  be  raised  by  tax  only  the 
balance  of  such  aggregate  amount  after  making  such  deductions." 


30 


I 


No  such  obligation  is  imposed  upon  the  Comptroller  in  the 
new  bill  for  the  tax  year  of  1907.  As  the  annual  meeting  of  the 
Board  of  Aldermen  would  be  the  first  Monday  of  July,  1906,  and 
the  report  required  from  the  Comptroller  under  section  900  refers 
to  said  annual  meeting  and  tax  for  1906,  and  under  the  new  bill 
would  refer  to  the  annual  meeting  of  the  Board  of  Aldermen 
October  i,  1907,  relating  to  the  tax  for  1908,  it  would  appear 
that  no  provision  has  been  made  in  the  new  bill  for  this  important 
statement  from  the  Comptroller  to  the  Board  of  Aldermen  at 
the  meeting  September  15,  1906,  authorized  by  the  new  bill,  for 
the  purpose  of  fixing  the  tax  rates  on  the  duplicate  assessment 
rolls  for  1907. 

6.  Section  2  of  the  new  bill  required  the  Board  of  Taxes  and 
Assessments  to  certify  to  the  correctness  of  the  rolls  of  1907. 
"The  rolls,  so  certified,  must,  on  the  15th  day  of  September, 
1906,  be  delivered  by  the  Board  of  Taxes  and  Assessments  to  the 
Board  of  Aldermen,  which  shall  meet  at  noon  on  that  day  at  the 
City  Hall,  or  usual  place  of  meeting,  for  the  purpose  of  receiv- 
ing the  same  and  for  the  purpose  of  performing  such  other  duties 
in  relation  thereto  as  are  prescribed  by  law." 

As  the  only  duties  "  prescribed  by  law  "  appear  to  relate  to 
the  annual  meeting  of  the  Board  of  Aldermen  to  be  held  on  the 
first  Monday  in  July,  1906,  for  the  tax  year  of  1906,  and,  under 
the  new  bill,  the  first  day  of  October,  1907,  for  the  year  of  1908, 
it  may  be  open  to  question  whether  the  failure  in  section  2  of  the 
new  bill  to  provide  for  the  Comptroller's  statement  required 
under  section  900  to  be  submitted  to  the  Board  of  Aldermen 
"  at  least  two  weeks  before  its  annual  meeting  in  each  and  every 
year  for  the  purpose  of  imposing  the  annual  taxes,"  and  the 
further  failure  to  specifically  refer  to  the  sections  imposing  cer- 
tain duties  to  be  performed  by  the  Board  of  Aldermen  at  their 
annual  meeting,  or  to  reiterate  the  powers  therein  conferred, 
do  not  leave  the  Board  of  Aldermen  without  power  to  fix  the 
tax  rate  for  the  assessments  on  the  duplicate  roll  for  1907,  and 
to  perform  other  important  duties  relating  to  said  assessments 
at  their  meeting,  to  be  held,  as  provided  in  section  2  of  the  new 
bill,  on  the  fifteenth  day  of  September,  1906. 


31 

7.  Section  907  requires  the  Board  of  Taxes  and  Assessments 
to  furnish  the  Supervisor  of  the  City  Record  with  a  copy  of  the 
Annual  Record  of  the  assessed  valuation  of  real  estate  within 
three  weeks  after  the  delivery  of  the  assessment  rolls  to  the  Board 
of  Aldermen.  Under  section  1527  (New  York  Charter)  this  copy 
is  to  be  published  in  the  City  Record  within  ninety  days  after  the 
delivery  of  said  copy  to  the  Supervisor.  This  would  require  the 
publication  of  the  assessment  rolls  of  1906  during  the  last  week 
of  October,  1906,  or  two  weeks  after  the  copy  of  the  duplicate 
rolls  for  1907  has  been  furnished  to  the  Supervisor  of  the  City 
Record  under  the  same  law.  As  this  publication  for  each  year 
will  cost  the  City  from  $40,000  to  $50,000,  it  would  appear  a 
waste  of  time  and  money  to  publish  the  assessment  rolls  for  1907, 
practically  covering  the  same  data  as  the  rolls  for  1906  and  pub- 
lished within  two  months  after  the  publication  of  the  rolls  for 
1906. 

8.  Under  this  bill  the  tax  for  1906  becomes  "  due  and  payable  " 
on  the  first  Monday  of  October,  1906.  The  tax  for  1907  "  may 
be  paid  "  January  i,  1907,  three  months  after  the  time  when  the 
1906  tax  is  due  and  payable.  This  will  impose  a  hardship  upon 
the  average  taxpayer  and  will  force  many  to  borrow  money  for 
prompt  payment  of  tax  or  compel  them  to  defer  payment  until 
the  tax  becomes  a  lien  and  interest  at  7  per  cent,  per  annum 
begins  to  run. 

9.  Under  this  bill  a  rebate  of  3  per  cent,  per  annum  is  allowed 
on  payments  made  between  the  ist  of  January,  1907,  and 
December  i,  1907.  Those  who  borrow  money  to  pay  their  taxes 
must  pay  5  or  6  per  cent,  interest.  The  rebate  allowed  is  no  in- 
ducement to  those  who  are  forced  to  borrow  or  to  those  who 
can  profitably  use  their  money.  Thus,  failure  to  collect  the  taxes 
in  the  early  months  of  the  year  would  defeat  the  object  of  the 
bill  and  compel  the  issue  of  short-term  bonds. 

10.  Beginning  the  work  of  assessments  at  the  first  of  the  year 
instead  of  the  last,  makes  it  impossible  to  include  in  the  rolls 
the  accretions  of  the  year,  due  to  natural  growth,  improvements, 
etc.,  estimated  at  $100,000,000;  new  estates;  corporations  or- 


4 


I 


32 


33 


ganized  during  the  year;  the  personal  property  of  new  residents, 
etc.,  estimated  at  $100,000,000.  Special  franchise  assessments 
estimated  at  $375,000,000 — a  total  loss  in  assessments  on  the  rolls 
for  1907  of  $575,000,000,  or  a  tax  loss  at  1.51  of  $8,702,165. 

11.  Under  existing  law  the  tax  becomes  a  lien  on  the  first 
Monday  in  October,  about  8>1  months  after  the  opening  of  the 
books  of  Annual  Record  for  public  inspection,  etc.  Under  the 
new  bill  the  tax  becomes  a  lien  October  i  of  the  year  following 
the  preparation  of  the  rolls,  or  17  months  after  the  opening  of 
the  annual  record  for  public  inspection,  etc. 

12.  Under  existing  law  interest  on  unpaid  taxes  runs  from 
January  i,  or  three  months  and  a  half  after  the  tax  rolls  are 
delivered  to  the  Receiver  of  Taxes.  Under  the  new  bill  interest 
on  unpaid  taxes  runs  from  October  1  in  the  year  following  the 
delivery  of  the  tax  rolls  to  the  Receiver  of  Taxes,  or  a  period 
of  nine  months  after  the  delivery  of  the  rolls  to  the  Receiver. 

The  accompanving  statement  shows  in  comparative  form  the 
essential  features  of  the  law  now  in  force  and  the  changes  therein 
under  the  proposed  amendments. 


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34 

Amendment  in  Relation  to  Omitted  Property* 

Under  existing  law  real  and  personal  property  not  appearing 
on  the  assessment  rolls  on  the  second  Monday  of  January — the 
date  when  the  books  of  annual  record  are  ppened  for  public  in- 
spection, examination  and  correction — cannot  be  included  in  the 
aggregate  of  assessed  valuations  subject  to  taxation. 

As  the  tax  liability  depends  upon  the  ownership  of  taxable 
property  on  a  certain  date,  it  appears  unjust  that  its  omission 
from  the  rolls  on  that  date,  through  clerical  oversight  or  other- 
wise, should  place  it  beyond  the  power  of  the  taxing  authorities, 
even  though  its  existence  may  have  been  brought  to  their  knowl- 
edge before  the  closing  of  the  books.  As  this  is  manifestly  unjust 
to  the  general  taxpayer,  the  Connnission  recommend  the  follow- 
ing proposed  amendment  to  the  Charter : 

An  Act  to  amend  The  Greater  New  York  Charter  relative 
to  the  power  of  the  Department  of  Taxes  and  As- 
sessments to  add  certain  property  and  names  to  the 
assessment  rolls. 
The  People  of  the  State  of  Nezv  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section  i.  Chapter  four  hundred  and  sixty-six,  title  one  of 
chapter  seventeen,  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  by  inserting  therein  a  new  section,  to  be  section  eight 
hundred  and  ninety- four  a  thereof  and  to  read  as  follows : 

Section  894a.  So  long  as  the  books  of  annual  record 
of  the  assessed  valuation  of  real  and  personal  estate  of  the 
several  boroughs  remain  open  for  public  inspection,  exam- 
ination and  correction,  the  board  of  taxes  and  assessments, 
after  giving  at  least  ten  days  prior  personal  notice  to  the 
party  in  interest,  may  add  to  the  rolls  of  assessment  of 
such  annual  record  any  real  estate,  or  the  name  of  the 
owner  of  any  personal  estate,  and  also  the  assessed  valua- 
tion of  any  such  real  or  personal  estate  that  may  have  been 
omitted  from  such  rolls  on  the  day  of  the  opening  of  such 
books. 
Section  2.  This  act  shall  take  effect  immediately. 


35 


Amendment  in  Relation  to  Applications  for  Remission 

or  Reduction  of  Taxes. 

The  following  amendment  of  section  897,  New  York  Charter, 
is  recommended.  Its  purpose  is  to  correct  the  section  so  as  more 
clearly  to  express  its  intent  and  to  place  a  reasonable  limitation 
on  the  time  within  which  applications  for  remission  or  reduction 
of  taxes  may  be  made  to  the  Board  of  Taxes  and  Assessments : 

An  Act  to  amend  The  Greater  New  York  Charter  relative 
to  the  power  of  the  Department  of  Taxes  and  As- 
sessments to  remit  or  reduce  a  tax. 

The  People  of  the  State  of  New  York,  represented  in 
Senate  and  Assembly,  do  enact  as  follows: 

Section  i.  Section  eight  hundred  and  ninety-seven  of 
The  Greater  New  York  Charter,  as  amended  by  chapter 
one  hundred  and  ninety-two  of  the  laws  of  nineteen  hun- 
dred and  two,  is  hereby  amended  to  read  as  follows : 

Section  897.  At  any  time  within  one  year  after  the  delivery 
of  the  books  to  the  receiver  of  taxes  for  the  collection  of  any  tax 
upon  real  or  personal  estate  if,  in  the  opinion  of  the  corporation 
counsel  lawful  cause  shall  have  been  shown,  the  board  of  taxes 
and  assessments  by  the  vote  of  a  majority  of  all  the  commis- 
sioners, may  remit  or  may  reduce  any  such  tax  which  by  such 
board  shall  be  found  to  be  erroneous  or  excessive;  but  no  such 
tax  shall  be  so  remitted  or  reduced  except  upon  satisfactory  proof 
that  application  for  relief  within  the  period  prescribed  by  other 
laws  for  the  correction  of  assessments  has  been  prevented  by  ill- 
ness or  by  absence  from  the  city.  Nothing  herein  contained  is 
intended  to  affect,  or  shall  affect,  any  provision  of  section  934  of 
The  Greater  New  York  Charter  or  of  section  259a  of  the  tax  law. 

Section  2.  This  act  shall  take  effect  immediately. 


I 


36 

Amendment  in  Relation  to  the  Refunding  by  the  State 
of  Uncollected  Direct  Taxes. 

An  Act  to  amend  the  Tax  Law  relating  to  the  cancellation 
and  reduction  of  assessments  and  the  remission  of 
taxes. 

The  People  of  the  State  of  Nezv  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

Section  i.  Chapter  nine  hundred  and  eight  of  the  laws  of 
eighteen  hundred  and  ninety-six,  entitled  "An  act  in  relation  to 
taxation,  constituting  chapter  twenty-four  of  the  General  Laws," 
is  hereby  amended  by  inserting  therein  a  new  section,  to  be  section 
one  hundred  and  ten  thereof,  and  to  read : 

Section  no.  Assessments  Canceled  or  Reduced.     In  every 
case  where  an  assessment  included  in  the  equalized  valuation  of 
real  and  personal  property,  as  fixed  by  the  state  board  of  equaliza- 
tion, shall  have  been  canceled  or  reduced,  or  the  tax  thereon 
shall  have  been  duly  remitted,  by  final  order  of  the  court,  or 
under  any  provision  of  law,  the  state  comptroller,  on  application 
of  the  treasurer  of  the  county  wherein  such  assessment  shall  have 
been  made,  or  if  made  in  the  City  of  New  York,  on  the  application 
of  the  comptroller  of  said  city,  and  on  satisfactory  proof  of  such 
cancellation,  reduction  or  remission,  shall  cancel,  if  unpaid,  and 
if  paid,  shall  refund,  the  state  tax  imposed  and  levied  upon  such 
canceled  or  reduced  assessment,  or  included  in   such  remitted 
tax,  provided  that  within  two  years  after  such  final  cancellation 
or  reduction,  or  such  final  remission,  application  for  relief  under 
the  provisions  of  this  section  shall  have  been  filed  with  the  state 
comptroller. 

Section  2.  This  act  shall  take  effect  immediately. 

REMARKS. 

Section  no.  The  purpose  of  this  amendment  is  to  give 
authority  to  the  State  Comptroller  to  cancel,  if  unpaid,  and  to 
refund,  if  paid,  any  State  tax  imposed  upon  assessments  that  have 
been  legally  set  aside  by  final  action  of  the  courts,  or  canceled 


37 


or  reduced  by  other  legal  authority,  provided  such  assessments 
were  included  in  the  equalized  assessed  valuations  upon  which  the 
State  tax  was  imposed. 

The  imposition  of  a  tax  implies  that  something  exists  capable 
of  being  taxed.  If  there  is  nothing  to  tax.  a  tax  erroneously 
imposed  should  not  stand.  If  the  State  is  convinced  that  the 
basis  of  the  tax  has  been  destroyed  by  the  courts  or  other  legal 
authority,  the  tax  itself  should  be  canceled,  if  unpaid,  or  refunded, 
if  paid. 

The  section  gives  the  City  substantially  what  the  City  and 
State  give  the  individual  under  existing  laws — relief  from  a  tax 
erroneously  imposed. 


{' 


I 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


PROPOSED    REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND  REVENUE. 


December,  1906. 


New  York  : 

MARTIN  B.  BROWN  COMPANY.  PRINTERS  AND   STATIONERS 

Nos.  49  TO  57  Park  Place. 

1906. 


f 


Chairman, 
Edgar  J.  Levey. 


Committee  on  Taxation  and  Revenue. 

Edwin  R.  A.  Seligman,  Morris  K.  Jesup, 

Francis  Lynde  Stetson,  Joseph  Haag, 

Lawson  Purdy. 


Committee  on  The  City  Debt  and  Special  Assessments. 

Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  John  J.  Delany, 

Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


lit 

III 


i 


THE  COLLECTION  OF  ARREARS  OF  REAL  ESTATE 
TAXES  AND  ASSESSMENTS. 

The  Present  Method. 

The  present  method  of  enforcing  the  payment  of  arrears  of 
real  estate  taxes,  assessments  and  water  rents  is  contained  in 
Title  5  of  Chapter  XVIL  of  the  Charter  and  was  taken,  ahnost 
without  change,  from  the  Charter  of  the  old  City  of  New  York, 
called  The  Consolidation  Act.  The  plan  in  substantially  its  pres- 
ent form  has  been  in  force  for  many  years.  Briefly  described  it  is 
as  follows: 

Taxes,  assessments  and  water  rents  are  liens  upon  the  land 
assessed  and  are  preferred  in  payment  to  all  other  charges.  When 
taxes  or  assessments  are  unpaid  for  three  years  and  water  rents 
for  four  years  it  is  lawful  for  the  Collector  of  Assessments  and 
Arrears,  under  the  direction  of  the  Comptroller,  to  advertise  for 
sale  a  lease  of  the  property  for  the  lowest  term  of  years  at  which 
any  person  shall  offer  to  take  the  same  in  consideration  of  advanc- 
ing the  arrears,  with  interest  at  the  rate  of  seven  per  cent.,  to  the 
time  of  sale.  The  purchaser  of  such  leases  receives  a  certificate 
of  sale  describing  the  property,  the  term  of  the  lease,  the  amount 
of  arrears,  interest,  &c.,  advanced  ift  payment  for  the  lease  and  the 
time  when  the  purchaser  will  be  entitled  to  the  lease  of  the  prop- 
erty. If  there  are  no  bids  for  a  lease  of  any  property  offered  for 
sale,  the  City  of  New  York  may  bid  it  in  for  the  city. 

If  no  one  interested  m  the  property  pays  the  amount  mentioned 
in  the  certificate  of  sale  within  two  years  from  the  date  of  the 
certificate,  with  interest  at  the  rate  of  fourteen  per  cent.,  the  Com- 
ptroller shall  execute  to  the  purchaser  a  lease  of  the  property  for 


_.-  ^^-..^ J' 


it^m^k 


the  term  of  years  for  which  it  has  been  sold.  The  lease  cannot 
be  executed  and  dehvered  until  six  months  after  due  publication 
of  a  notice  that  unless  the  property  be  redeemed  by  a  certain  day, 
the  lease  will  be  conveyed  to  the  purchaser. 

Objections  to  the  Sale  of  Leases. 

The  experience  of  the  old  City  of  Xew  York  with  this  method 
of  enforcing  payment  of  arrears  has  been  that  a  very  small  per 
centage  of  the  property  put  up  for  sale  has  been  bid  in  by  individ- 
uals, the  bulk  of  the  property  being  bid  in  by  the  representatives 
of  the  city,  and  the  amount  realized  from  actual  sales  h  inconsider- 
able. As  the  sole  object  of  the  sale  is  to  realize  the  amount  due 
the  city,  the  whole  object  of  the  plan  is  defeated. 

Because  of  the  small  number  of  bidders,  the  leases  are  very 

long  and  the  risk  to  the  owners  of  property  correspondingly  great 

if  the  lease  should  be  upheld.     Leases  are  sold  for  five  hundred 

years.    This  is  practically  equivalent  to  the  sale  of  the  fee.  Under 

such  circumstances,  the  owner  of  the  property  would   receive 

nothing,  his  property  would  be  totally  lost  because  he  had  failed 

or  neglected  to  pay  the  city  within  the  time  required  by  law  a  small 

t)er  centage  of  its  value.    In  view  of  this  great  danger  to  owners 

of  property  the  Courts  have  been  exceedingly  vigilant  to  detect 

flaws  in  the  procedure  so  that  it  is  commonly  believed  that  a  valid 

lease  sold  for  arrears  is  almost  unknown.    With  the  value  of  the 

leases  so  utterly  discredited,  it  is  no  wonder  there  are  few  bidders 

and  that  when  leases  are  sold  the  term  of  years  is  abnormally 

long. 

So  poor  has  been  the  result  of  these  sales  of  leases  that  there 
have  been  only  six  such  sales  in  the  last  thirty-two  years.  The 
objections  may  be  summarized  as  follows:  The  expense  and 
the  danger  to  property  owners  is  excessive  and  unreasonable.  The 
city  is  unable  by  the  sale  of  leases  to  collect  its  revenue  when  it 
requires  it. 


Some  persons  have  suggested  that  the  City  of  Xew  York 
should  adopt  the  remedy  existing  in  the  former  City  of  Brooklyn 
by  the  sale  at  auction  of  the  fee  of  the  property.  Although  this 
method  was  eflfective  in  enforcing  the  payment  of  arrears,  it  is 
objectionable  because  too  severe  on  property  owners  whose  prop- 
erty may  be  sacrificed  and  because  it  is  difficult  to  convey  good 
title  by  a  sale  for  taxes.  Titles  are  often  clouded  and  purchasers 
being  obliged  to  take  the  risk  of  a  bad  title  do  not  bid  the  full 
value  of  the  property. 

The  following  plan,  it  is  deemed,  would  be  effective  in  collect- 
ing arrears  promptly  and  at  the  same  time  would  impose  nc 
I^enalties  on  property  owners  and  in  many  cases  would,  in  fact,  re- 
duce the  amount  of  interest  they  may  now  be  required  to  pay. 


The  Remedy. 

To  be  satisfactory  any  method  of  collecting  arrears  of  real 
estate   taxes,   assessments   and   water   rents   must   combine   two 

qualities : 

The  remedy  must  be  eflfective  and  enable  the  city  to  collect  ar- 
rears promptly. 

The  remedy  must  cause  property  owners  the  least  possible  ni- 

convenience  and  risk. 

The  proposed  remedy  is  deemed  to  meet  these  conditions.     It 

is  briefly  described  as  follows: 

As  soon  as  taxes,  assessments  and  water  rents  are  laid,  a  lien 
attaches  to  the  property  in  favor  of  the  city  which  is  prior  to  any 
and  all  other  liens.  When  taxes  or  assessments  are  three  years 
in  arrears,  or  water  rents  four  years,  the  lien  of  such  arrears  will 
be  sold  at  auction  to  the  person  who  shall  bid  the  lowest  rate  per 
cent,  not  exceeding  twelve.  Upon  payment  of  the  purchase  money 
a  conveyance  of  the  "tax  lien,'  jjayable  in  three  years,  will  be 
executed  by  the  city  to  the  purchaser.  / 


8 

The  city  will  guarantee  the  vaHdity  of  the  Hen  so  that  the  only 
risk  taken  by  the  purchaser  will  be  the  sufficient  value  of  the 
property  affected  by  the  lien  and  the  possible  trouble  of  collection. 

"Tax  liens"  will  be  registered  in  the  office  of  the  Collector  of 
Assessments  and  Arrears  and  will  be  recordable  in  the  office  of  the 
Register.  The  procedure  for  collection  will  be  the  same  as  for 
the  collection  of  a  mortgage. 

A  "tax  lien"  will  provide  that  the  whole  of  the  principal  sum 
which  the  "tax  lien"  is  given  to  secure  shall  become  due  at  the 
option  of  the  owner  thereof  after  default  in  the  payment  of  inter- 
est for  thirty  days  or  after  default  in  the  payment  of  any  tax, 
assessment  or  water  rent  for  three  years  and  three  months.  This 
provision  will  very  nearly  insure  the  continuous  future  payment 
of  arrears,  subsequent  to  the  sale  of  a  "tax  lien,"  as  the  owner  of 
the  property  must  pay  or  suffer  the  foreclosure  of  the  "tax  lien." 

Any  person  having  an  interest  in  property  affected  by  a  "tax 
lien"  may  discharge  the  same  before  maturity  on  giving  thirty 
days'  notice  to  the  holder  thereof  upon  payment  of  the  principal 
with  interest  to  the  next  succeeding  interest  period. 

"Tax  liens"  will  be  exempt  from  taxation  and  will  be  made 
legal  investments  for  Savings  Banks  in  case  they  do  not  exceed 
half  the  assessed  value  of  the  property  affected. 

Advantages. 

"Tax  liens"  will  be  a  thoroughly  safe  investment,  being  abso- 
lutely the  first  liens  on  city  real  estate.  "Tax  liens"  for  large  sums 
should  sell  readily  at  a  low  rate  of  interest  and  even  "tax  liens" 
for  small  sums  should  be  a  profitable  investment  and  sell  easily  at 
some  rate  less  than  the  maximum.  It  is  probable  that  some  per- 
sons and  corporations  will  undertake  the  purchase  of  "tax  liens" 
as  a  business,  perhaps  issuing  debenture  bonds  thereby  secured. 

If  "tax  liens"  are  readily  salable  the  city  will  no  longer  be  kept 
out  of  the  use  of  its  proper  income.  The  trouble  and  expense  of 
collection  will  be  shifted  from  the  city  to  private  parties. 


From  the  standpoint  of  the  taxpayer,  the  proposed  plan  has 
the  great  advantage  that,  the  payment  of  taxes  over  three  years 
in  arrears  can  be  postponed  for  three  }-ears  more  upon  payment  of 
interest  and  subsequent  taxes.  Moreover,  the  taxpayer,  if  a 
resident,  will  always  get  personal  notice,  and  will  generally  get 
personal  notice  even  if  a  non-resident,  when  any  action  is  brought 
which  might  result  in  the  loss  of  the  property. 

Description  of  the  Bill. 

The  Bill  amends  Title  5  of  Chapter  XVTI.  of  the  New  York 
Charter.  The  sections  contained  in  Title  5  are  now  numbered 
from  1017  to  1054,  both  inclusive. 

Section  i,  of  the  Bill,  amends  the  caption  of  Chapter  XVH. 
by  inserting  the  words  "tax  liens  on"  so  that  Title  5  shall  read: 
"Sales  of  tax  liens  on  lands  for  taxes,  assessments  and  water 
rents." 

Section  2,  of  the  Bill,  amends  the  caption  of  Title  5  so  as  to 
conform  to  the  caption  of  the  Chapter. 

Section  1017  of  the  Charter  remains  unchanged.  It  deter- 
mines the  time  when  taxes,  assessments  and  water  rents  are  to  be 
liens  on  lands  assessed. 

Section  3  enacts  a  new  section  to  be  numbered  1018,  which 
defines  and  describes  a  "tax  lien"  with  its  nature  and  incidents 
and  authorizes  the  Comptroller  to  obtain  the  names  of  the  owners 
of  record  of  the  property  affected  thereby ;  provides  that  a  "tax 
lien"  shall  not  be  invalidated  by  a  mistake  in  the  name  of  the 
owner  of  record  and  that  "tax  liens"  shall  be  exempt  from  tax- 
ation. 

Sections  4  and  5  renumbered  Charter  Sections  1018  and  1019. 
which  remain  unchanged  and  relate  to  the  publication  of  notice  of 
the  confirmation  of  assessments  and  the  charging  of  interest,  if 
assessments  are  unpaid  after  sixty  days. 


10 

Section  6.  Charter  Section  1020  is  renumbered  so  as  to  be 
Section  1021.  It  provides  the  rate  of  interest  to  be  charged  on 
all  arrears  of  taxes  and  assessments.  The  section  is  unchanged 
except  that  reference  to  the  sale  of  a  lease  is  omitted. 

Section  7  renumbers  Charter  Section  1021  so  as  to  be  Section 

1022.  It  provides  for  the  apportionment  of  assessments  and  re- 
mains substantially  unchanged. 

Sections  8,  9,   10  and  11  renumber  Charter  Sections  1022, 

1023,  1023a  and  1024.  The  sections  remain  unchanged.  They 
relate  to  water  rents ;  the  return  of  arrears  to  the  Collector  by  the 
Receiver  of  Taxes ;  notifying  taxpayers  of  assessments  and  pro- 
vision for  the  inclusion  of  water  rents  in  the  Assessment  Rolls. 

Section  12  renumbers  Charter  Section  1025  so  as  to  be  1027. 
This  Section  provides  for  the  record  of  arrears  on  the  Assessment 
Rolls  and  remains  substantially  unchanged. 

Section  13  renumbers  Charter  Section  1026  so  as  to  be  1028. 
This  Section  provides  for  notices  of  arrears  to  be  printed  on  tax 
bills  and  is  amended  to  conform  to  the  new  remedy  so  that  notice 
of  the  .sale  of  a  ''tax  lien"  shall  be  given  instead  of  notice  of  the 
sale  of  the  lease. 

Section  14.  Charter  Section  1027  is  renumbered  so  as  to  be 
1029.  This  section  now  provides  the  procedure  for  the  sale  of 
leases  and  is  amended  so  as  to  provide  for  the  sale  of  "tax.  liens." 
Such  procedure  is  substantially  unchanged.  It  provides  that  when 
taxes  or  assessments  are  unpaid  for  three  years  or  water  rents 
for  four  years,  the  Collector  of  Assessments  and  Arrears  shall 
advertise  "tax  liens"  for  sale  for  a  term  of  three  years  to  the 
person  who  bids  the  lowest  rate  of  interest,  not  exceeding  twelve 
per  cent.  The  Collector  shall  give  to  the  purchaser  of  "tax  liens" 
a  certificate  of  sale,  describing  the  property  encumbered  by  the 
lien ;  the  sum  to  be  paid ;  the  amount  advanced  and  the  rate  of  in- 


II 


terest.    All  the  provisions  for  advertising  such  sales  are  preserved 
unchanged. 

Section  15.     Charter  Section  1028  is  renumbered  so  as  to  be 

1030  and  provides  for  the  advertisement  of  contiguous  lots  as 
one  parcel.  It  is  unchanged  in  substance. 

Section  16.      Charter  Section  1029  is  renumbered  so  as  to  be 

103 1  and  is  unchanged  in  substance.     It  provides  that  the  Comp- 
troller may  postpone  sales. 

Section  17.  Charter  Section  1030  is  renumbered  so  as  to  be 
Section  1032.  It  provides  that  the  Collector  of  Assessments  and 
Arrears  shall  conduct  the  sales  and  is  amended  so  as  to  provide 
for  a  deposit  or  payment  on  account  by  the  purchaser  at  the  time 
of  sale  upon  terms  and  conditions  prescribed  by  the  Comptroller. 
"Tax  liens"  shall  be  delivered  to  the  purchaser,  without  charge, 
upon  payment  of  the  amount  due.  "Tax  liens"  shall  be  executed 
by  the  Collector  of  Assessments  and  Arrears  in  the  name  of  the 
City  of  New  York.  "Tax  liens"  not  paid  for  within  thirty  days 
may  be  cancelled  and  the  deposit  forfeited. 

Section  18.  Charter  Sections  103 1  to  1049.  both  inclusive, 
are  repealed.  All  these  Sections  relate  solely  to  the  procedure  to 
be  followed  in  case  of  the  sale  of  leases  and  have  no  bearing  upon 
the  sale  of  "tax  Hens." 

Section  19  adds  a  new  section  to  be  Section  1033.  ^t  pro- 
vides for  the  procedure  when  no  bid  for  a  "tax  lien"  is  received. 
In  this  case  the  Comptroller  and  Corporation  Counsel  shall  in- 
vestigate the  facts  and  reduce  the  amount  to  a  sum  for  which, 
in  their  judgment,  a  "tax  lien"  bearing  twelve  per  cent,  interest 
can  be  sold.  They  shall  file  a  certificate  in  writing  setting  forth 
the  amount  so  determined,  with  their  reasons.  Such  "tax  lien" 
shall  then  be  advertised  for  sale  to  the  person  who  shall  bid  the 
highest  amount  of  money  in  excess  of  the  amount  fixed  by  the 
Comptroller  and  Corporation  Counsel.    If  still  no  bid  is  received. 


12 

the  Comptroller  and  Corporation  Counsel  shall  reconsider  their 
determination  and  proceed  as  before.  This  Section  is  added  in 
order  that  some  collection  may  be  made  by  the  city  and  title  cleared 
in  cases  where  the  arrears  equal  or  exceed  the  value  of  the  prop- 
erty. , 

Sfxtion  20.  Charter  Section  1050  is  renumbered  so  as  to 
be  Section  1034.  It  provides  for  the  delivery  of  a  duplicate  in 
case  the  "tax  lien"  is  lost  and  is  otherwise  without  change  of  sub- 
stance except  that  the  provision  for  registration  is  omitted  here 
and  inserted  in  Section  1037. 

Section  21.  Charter  Section  105 1  is  renumbered  so  as  to  bcf 
1035.  It  provides  that  bills  for  arrears  of  taxes  and  assessments 
shall  be  furnished  when  requested.  It  also  provides  that  the  re- 
ceipt of  the  Collector,  countersigned  by  the  Comptroller,  shall 
free  the  property  from  all  liens  except  the  lien  of  "tax  liens"  duly 
sold.  The  Section  is  unchanged  except  in  so  far  as  was  necessary 
to  conform  the  procedure  to  the  method  of  collection  by  the  sale 
of  "tax  liens"  instead  of  leases. 

Section  22.  Charter  Section  1052  is  renumbered  so  as  to 
be  1036.  It  provides  that  fees  for  searches  shall  be  included  in 
the  bills  mentioned  in  the  preceding  section  and  is  unchanged. 

Section  23.  Charter  Section  1053  is  renumbered  so  as  to  be 
Section  1037.  It  provides  for  a  complete  record  of  sales  and  is 
changed  to  conform  to  the  new  procedure  by  the  sale  of  "tax 
liens."  The  record  is  to  be  kept  by  the  Collector  of  Assessments 
and  Arrears,  as  heretofore.  No  transfer  not  recorded  is  valid  as 
against  a  bona  fide  purchaser  for  value  without  notice. 

Section  24.  Charter  Section  1054  is  renumbered  so  as  to 
be  Section  1038.  It  provides  for  the  preservation  of  affidavits  of 
the  publication  of  notices  and  remains  unchanged. 


13 

Section  25  is  new  and  provides  for  the  reimbursement  of 
the  owner  of  a  "  tax  lien  "  in  case  the  "  tax  lien  "  shall  be  vacated 
or  canceled.  Inaccuracy  in  the  calculation  of  the  amount  does 
not  render  the  lien  void  but.  if  the  anionnt  is  excessive,  the  excess 
shall  be  repaid  to  the  purchaser. 

Section  26.  This  section  is  not  a  part  of  the  Charter  and  is 
designed  to  save  to  the  city  and  the  taxpayers  all  rights  acquired 
before  the  passage  of  the  Act. 

An  Act  to  amend  the  Greater  Xew  York  Charter  relative  to 
sales  of  lands  for  taxes,  assessments  and  water  rates. 

The  People  of  the  State  of  Nezv  York,  represented  in  Senate 
and  Assembly,  do  enact  as  fallon's: 

Section  i.  The  caption  of  Chapter  XVII.  of  the  Greater 
New  York  Charter,  as  re-enacted  by  Chapter  four  hundred  and 
sixty-six  of  the  Laws  of  1901,  is  hereby  amended  so  as  to  read 
as  follows : 


CHAPTER  XVII. 
Taxes  and  Assessments. 

Title  I .  Department  of  Taxes  and  Assessments ;  Powers 
and  Duties. 

Title  2.  Assessments  for  local  improvements  other  than 
those  confirmed  by  a  Court  of  Record. 

Title  3.  Vacating  and  modifying  assessments  for  local  im- 
provements other  than  those  confirmed  by  a 
Court  of  Record. 

Title  4.  Opening  Streets  and  Parks. 

Title  5.  Sales  of  tax  liens  on  lands  for  taxes,  assessments 
and  water  rates. 

Section  2.  The  caption  of  Title  5  of  Chapter  X\  II.  of  the 
Greater  New  York  Charter,  as  re-enacted  by  Chapter  four  hun- 


14 

dred  and  sixty-six  of  the  Laws  of  1901,  is  hereby  amended  so  as 
to  read  as  follows: 

TITLE  5. 
Sales  of  Tax  Likxs  on  Lands  for  Taxes.  Assessments  and 


Water  Rates. 

Section  3.  Said  law  is  hereby  amended  by  adding  a  new  sec- 
tion to  be  section  1018,  and  to  read  as  follows: 

Tax  Liens. 

§  1018.  The  lien  of  taxes,  assessments  or  water  rents  may  be 
transferred  by  the  city,  as  hereinafter  provided,  by  an  instrument 
in  writing  which  shall  be  called  a  "  tax  lien."  A  tax  lien  shall  con- 
tain the  name  of  the  owner  of  record  of  the  property  covered 
thereby  and  of  the  person  to  whom  it  is  payable,  the  aggregate 
amount  of  the  lien  thereby  secured  and  the  items  of  which  it  is 
composed  with  their  dates  and  accrued  interest  and  penalties 
separately  stated,  the  rate  of  interest,  the  date  of  execution  and 
the  due  date  which  shall  be  three  years  after  execution,  an  identi- 
fying description  of  the  property  including  the  name  of  the  Bor- 
ough and  the  number  of  the  section  or  ward  in  which  it  is  sit- 
uated, and  its  block,  lot  and  street  number,  if  any.  Interest  shall 
be  payable  semi-annually. 

The  whole  of  the  principal  sum  which  the  tax  lien  is  given 
to  secure  shall  become  due  at  the  option  of  the  holder  thereof  after 
default  in  the  payment  of  interest  for  thirty  days,  or  after  default 
in  the  payment  of  any  tax,  assessment  or  water  rent  for  three 
years  and  three  months. 

Any  person  having  a  legal  or  beneficial  interest  in  property 
aflFected  by  a  tax  lien  may  discharge  the  same  before  maturity  on 
giving  thirty  days'  notice  to  the  holder  thereof,  upon  payment 
of  the  principal  with  interest  to  the  next  succeeding  interest 
period. 


15 

A  tax  lien  shall  be  acknowledged  by  the  officer  executing  it 
and  may  be  recorded  as  a  conveyance  of  real  property.  Save  as 
provided  in  this  title  and  as  may  be  necessary  fully  to  accomplish 
the  purpose  of  this  title,  the  transfer,  assignment,  satisfaction 
and  foreclosure  of  and  succession  to  the  liens  secured  by  tax  liens 
shall  be  governed  by  the  common  law,  as  modified  by  other  stat- 
utes than  this,  applicable  to  mortgages  made  to  secure  the  pay- 
ment of  debts. 

The  Comptroller  is  hereby  authorized  to  enter  into  an  agree- 
ment with  a  responsible  person  or  corporation  who  shall  furnish 
the  names  of  the  owners  of  record  of  property  upon  w'hich  tax 
liens  have  been  sold.  The  Comptroller  may  require  that  such  per- 
son or  corporation  shall  guarantee  that  such  names  so  furnished 
are  accurate  under  penalty  of  an  amount  equal  to  the  sum  the 
payment  of  which  the  tax  lien  is  given  to  secure.  Xo  tax  lien 
shall  be  invalidated  by  mistake  in  the  name  of  the  owner  of  record 
therein  set  forth. 

Tax  liens  shall  be  exempt  from  all  taxation  whether  for  State, 
county  or  local  purposes,  as  well  as  from  the  recording  tax  pre- 
scribed by  Article  XIV.  of  the  Tax  Law. 

Section  4.  Section  1018  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  10 19. 

Section  5.  Section  loig  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  1020. 

Section  6.  Section  1020  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  102 1,  and  is  amended  so  as  to  read  as  follows: 


Rate. 

§  1 02 1.  Interest  shall  hereafter  be  charged  and  collected  at 
the  rate  of  seven  per  centum  per  annum  on  all  arrears  of  taxes  and 
assessments  returned  to  the  collector  of  assessments  and  arrears 
from  the  time  they  become  due  until  the  date  of  payment  [or  in 
case  a  sale  has  taken  place,  as  provided  in  section  ten  hundred 


i6 

and  twenty-seven,  until  the  date  of  the  certificate  mentioned  in 
said  section,]  and  on  the  rents  and  charges  for  water  from  the 
time  the  taxes  become  due,  to  which  they  may  be  added  as  re- 
quired by  section  ten  hundred  and  twenty-seven  £twenty-fivej 
until  the  same  date  respectively. 

Section  7.  Section  102 1  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  1022,  and  is  amended  so  as  to  read  as  follows: 

Apportionment  of  Assessment. 

§  1022.  If  a  sum  of  money  in  gross  has  been  or  shall  be  as- 
sessed for  local  improvements,  upon  any  lands  or  premises  in  The 
City  of  New  York,  any  person  or  persons  claiming  any  divided 
or  undivided  part  thereof  may  pay  such  part  of  the  sums  of  money 
so  assessed,  also  of  the  interest  and  charges  due  or  charged  there- 
on, as  the  Comptroller  may  deem  to  be  just  and  equitable ;  and  the 
remainder  of  the  sum  of  money  so  assessed,  together  with  the 
interest  and  charges,  shall  be  a  lien  upon  the  residue  of  the  land 
and  premises  only,  upon  which  residue  a  tax  lien  may  be  sold  in 
pursuance  of  the  provisions  of  this  Act,  to  satisfy  the  residue  of 
such  assessment,  interest,  or  charges,  in  the  same  manner  as 
though  the  residue  of  said  assessment  had  been  imposed  upon  the 
residue  of  said  land  or  premises. 

Section  8.  Section  1022  of  said  law  is  hereby  renumbered  so 
as  to  be  Section  1023. 

* 

Section  9.  Section  1023  of  said  law  is  hereby  renumbered  so 
as  to  be  Section  1024. 

Section  10.  Section  1023a  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  1025. 

Section  ii.  Section  1024  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  1026. 

Section  12.  Section  1025  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  1027  and  is  amended  so  as  to  read  as  follows : 


^ 


'7 

Arrears  Likewise  to  be  Provided  For. 

§  1027.  There  shall  be  ruled  in  the  ^'early  assessment  rolls  of 
the  taxes  in  each  section  or  ward,  a  column  headed  "Arrears,"  in 
which  the  collector  of  assessments  and  arrears  shall  annually, 
before  any  taxes  for  the  year  are  collected,  cause  to  be  entered  the 
word  "arrears  [or  "sold,"  according  as  the  fact  may  be,J  opposite 
to  the  ward,  lot,  town  block  and  map  numbers  on  which  any  ar- 
rears of  taxes,  or  of  taxes  with  the  water  rent  added,  shall  be  due, 
or  on  which  any  assessment  shall  remain  unpaid  which  was  due 
or  confirmed  one  month  prior  to  the  first  of  June,  then  last  past, 
[or  which  may  have  been  sold  for  assessments,  taxes  or  water 
rents,  and  yet  be  redeemable]. 

Section  13.     Section  1026  of  said  law  is  hereby  renumbered 
so  as  to  be  Section  1028,  and  is  amended  so  as  to  read  as  follows : 

Bills  for  Taxes  to  Snow  Arrears. 

§  1028.     There  shall  be  ruled  a  column  for  "Arrears"  in  every 
bill  rendered  for  taxes  for  lots  on  which  said  arrears  or  assess- 
ments, or  taxes  with  water  rents  added,  may  be  due,  as  aforesaid, 
[or  may  have  been  sold  and  yet  be  redeemable,]  in  which  shall 
be  written  opposite  the  entry  of  the  ward,  lot,  town  block  and  map 
number  of  said  lot,  "arrears"  with  the  date  when  such  arrears  or 
any  part  thereof  first  accrued ;  [or  "sold,"  according  as  the  fact 
may  be ;]  and  at  the  bottom  of  said  bill  shall  be  printed :  "When- 
ever  any  tax  or  assessment  shall  remain  unpaid  for  three  years 
or  any  rent  for  water  for  four  years  a  tax  lien  on  the  property  will 
be  sold  to  .satisfy  such  arrears  of  taxes,  assessments  or  water 
r<^"ts."  ["the  columns  for  arrears  indicate  lots  sold  for  arrears,  or 
to  be  sold  therefor ;  arrears  to  be  paid  and  lots  redeemed  at  the 
office  of  the  collector  of  assessments  and  arrears."] 


11 


i8 

Section  14.  Section  1027  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1029,  and  is  hereby  amended  so  as  to  read  as 
follows : 

Sales  of  [Lands]  Tax^Liens  for  Taxes  and  Assessments; 

Proceedings. 

§  1029.     Whenever  any  tax  on  lands  or  tenements,  or  any  as- 
sessments on  lands  or  tenements  for  local  improvements,  shall 
remain  unpaid  for  the  term  of  three  years  from  the  time  the  same 
shall  have  been  confirmed,  and  also  whenever  any  rents  for  water 
in  said  citv  shall  have  been  due  and  unpaid  for  the  term  of  four 
years  from  the  time  the  same  shall  have  been  due,  it  shall  and  may 
be  lawful,  for  the  collector  of  assessments  and  arrears,  under  the 
direction  of  the  comptroller,  to  advertise  tax  liens  on  the  said 
lands  and  tenements  or  any  of  them  for  sale,  and  by  such  adver- 
tisement the  owner  or  owners  of  such  lands  and  tenements  re- 
.pectivelv  shall  be  required  to  pay  the  amount  of  such  tax,  as- 
sessment', or  water  rents  so  remaining  unpaid,  together  with  the 
niterest  thereon  at  the  rate  of  seven  per  centum  per  annum  to  the 
time  pavment,  with  the  charges  or  such  notice  and  advertisement, 
to  the  said  collector,  and  notice  shall  be  given  by  such  advertise- 
ment that  if  default  shall  be  made  in  such  payment  a  tax  lien  on 
such  lands  and  tenements  will  be  sold  as  public  auction  at  a  day 
and  place  therein  to  be  specified,  for  the  lowest  rate  of  interest,  not 
.^...A-u..r  twelve  per  centum  per  annum,  [term  of  years]  at  which 
anv  person  or  persons  shall  offer  to  take  the  same  in  consideration 
of  advancing  the  said  tax,  assessment,  or  water  rents,  as  the  case 
mav  be  and  the  interest  thereon  as  aforesaid  to  the  time  of  sale. 
and  the  charges  of  the  above-mentioned  notices  and  advertisement 
and  all  other  costs  and  charges  accrued  thereon ;  and  if,  notwith- 
standing such  notice,  the  owner  or  owners  shall  refuse  or  neg- 
lect to  pav  such  tax,  assessment,  or  water  rents,  with  the  interests 
as  aforesaid,  and  the  charges  attending  such  notice  and  advertise- 


19 

ment,  then  it  shall  and  may  be  lawful  for  the  said  collector  under 
the  direction  of  the  said  comptroller,  to  cause  a  tax  lien  on  such 
lands  and  tenements  to  be  sold  at  public  auction  for  a  term  of 
three  years,  for  the  purpose  and  in  the  manner  expressed  in  the 
said  advertisement,  and  such  sale  shall  be  made  on  the  day  and  at 
the  place  for  that  purpose  mentioned  in  the  said  advertisement, 
and  shall  be  continued  from  time  to  time,  if  necessary,  until  all 
the  tax  liens  on  the  lands  and  tenements  so  advertised  shall  be 
sold ;  and  the  said  collector  shall  give  to  the  purchaser  or  pur- 
chasers of  tax  liens  on  any  such  lands  and  tenements  a  certificate 
of  sale,  in  writing,  describing  the  lands  and  tenements  so  [pur- 
chased,] encumbered,  the  term  of  years  for  which  the  said  tax 
lien  [same]  shall  have  been  sold,  the  sum  to  be  paid  therefor,  the 
amount  advanced  thereon  and  the  rate  of  interest  which  [time 
when]  the  purchaser  will  be  entitled  to  receive  [to  a  lease  of  the 
said  lands  and  tenements].  But  no  tax  lien  on  houses  or  lots,  or 
improved  or  unimproved  lands,  in  The  City  of  New  York,  shall 
be  hereafter  sold  [or  leased]  at  public  auction  for  the  non-pay- 
ment of  any  tax,  assessment,  or  water  rents  which  may  be  due 
thereon,  unless  notice  of  such  sale  shall  have  been  published  once 
in  each  week  successively  for  three  months  in  the  City  Record  and 
the  corporation  newspapers,  which  advertisement  shall  contain, 
appended  to  said  notice,  a  particular  and  detailed  statement  of  the 
property  on  which  a  tax  lien  is  to  be  sold  for  taxes,  assessments  or 
water  rents ;  or  the  said  detailed  statement  and  description,  instead 
of  being  published  in  the  City  Record  and  the  corporation  news- 
papers, shall,  at  the  option  of  the  said  comptroller,  be  printed  in 
a  pamphlet,  in  which  case  copies  of  the  pamphlet  shall  be  de- 
posited in  the  office  of  the  said  collector,  and  shall  be  delivered  to 
any  person  applying  therefor.  And  the  notice  provided  for  in  this 
section  to  be  given  of  the  sale  of  tax  liens  on  houses  and  lots  and 
improved  and  unimproved  lands  shall  also  state  that  the  detailed 
statement  of  the  taxes,  assessments,  or  water  rents,  and  the  owner- 


20 

ship  of  the  property  [taxes]  taxed,  assessed,  [and]  or  on  which 
the  water  rents  are  unpaid,  is  pubHshed  in  the  City  Record  and  the 
corporation  newspapers,  or  in  a  pamphlet,  as  the  case  may  be,  and 
that  copies  of  the  pamphlet  are  deposited  in  the  office  of  the  said 
collector,  and  will  be  delivered  to  any  person  applying  for  the 
same.  No  other  notice  or  demand  of  the  tax,  assessment,  or  water 
rent  shall  be  required  to  authorize  the  sale  of  tax  liens  on  any 
lands  and  tenements  as  hereinbefore  provided. 

Section  15.  Section  1028  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1030,  and  is  amended  so  as  to  read  as  follows : 

Contiguous  Lots  to  be  Advertised  as  One  Parcel. 

§  1030.  In  advertising  tax  liens  on  houses  and  lots  and  im- 
proved and  unimproved  lands  to  be  sold  for  the  non-payment  of 
taxes  and  assessments  or  water  rents,  it  shall  be  the  duty  of  the 
collector  of  assessments  and  arrears  to  advertise  a  tax  lien  on  all 
the  houses  and  lots  or  other  lands  lying  contiguous  to  each  other 
and  belonging  to  the  same  owner  in  one  parcel,  unless  otherwise 
requested  by  such  owner,  but  he  may  sell  separately  tax  liens  on 
the  said  houses  and  lots  as  the  same  may  have  been  assessed. 

Section  16.  Section  1029  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1031,  and  is  amended  so  as  to  read  as  follows: 

Postponement  of  Sales. 

§  1031.  It  shall  be  lawful  for  the  comptroller  to  suspend  or 
f)Ostpone  any  sale  or  sales  of  tax  liens  on  lands  and  tenements  or 
any  portion  thereof  which  shall  have  been  advertised  for  sale,  to 
any  time  not  exceeding  fifteen  months  from  the  day  specified  in 
any  such  advertisement.  All  sales  which  shall  be  so  postponed  or 
suspended  shall  be  made  without  further  advertisement,  other  than 
a  general  notice  of  such  postponement,  to  be  published  in  the 
City  Record  and  the  corporation  newspapers. 


21 

Section  17.  Section  1030  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1032,  and  is  amended  so  as  to  read  as  follows: 

SALES  OF  TAX  LIENS  I'OR  TAXES  AXD  AS- 
SESSMENTS TO  BE  CONDITCTED  IJY  THE  COL- 
LECTOR OF  ASSESSMENTS  AXD  ARREARS: 
[PROVISION  FOR  REPAYMENT  OF  PURCHASE 
MONEY  WHEN  THE  SALE  IS  VACATED.]  PAY^- 
MENT  ON  ACCOUNT:  EXECl'TIOX  OF  TAX 
LIEN. 


§  1032.  The  collector  of  assessments  and  arrears  or  his  as- 
sistant shall  conduct  the  sales  hereinbefore  provided  to  be  made, 
and  no  auctioneer  other  than  said  collector  or  his  assistant  shall 
be  employed  to  make  such  sale,  and  no  auctioneer's  fees  shall  be 
charged  thereon.  A  deposit  or  payment  on  account  shall  be  made 
by  the  purchaser  at  the  time  of  sale.  The  comptroller  shall  pre- 
scribe the  amount  of  such  deposit  and  the  terms  and  conditions 
upon  which  it  shall  be  made.  [Certificates  of  sale.]  Tax  liens 
shall  be  made  and  delivered  to  the  purchaser  without  charge 
upon  payment  of  the  amounts  therein  shown  to  be  due.  Such  tax 
liens  shall  be  executed  by  the  collector  of  assessments  and  arrears 
in  the  name  of  The  City  of  New  York  under  the  common  seal 
of  the  city.  [And]  All  [certificates  of  sale,]  tax  liens  not  paid 
for  within  thirty  days  following  the  date  of  sale,  may  be  can- 
celed by  the  collector  of  assessments  and  arrears,  [and]  the  sales 
relating  thereto  declared  void,  and  the  deposit  made  for  the  ac- 
count of  such  sale  shall  be  forfeited.  [In  case  any  sale  shall  be 
vacated  or  canceled,  the  purchaser,  his  legal  representative  or 
assign,  shall  be  repaid  the  amount  paid  by  him  at  such  sale,  with 
interest  thereon  from  the  time  of  such  payment.] 

Section  18.  Sections  numbered  103 1  to  1049,  both  inclusive, 
of  said  law,  are  hereby  repealed. 


22 

Section  19.  The  said  law  is  hereby  amended  by  adding  there- 
to a  new  section  to  be  section  1033,  and  to  read  as  follows : 

Procedure  When  no  Bid  for  a  Tax  Lien  is  Received. 

§  1033.  1^  "^  bid  is  received  for  a  tax  lien  on  any  parcel 
of  property  at  a  duly  advertised  sale  and  it  appears  that  the  taxes, 
assessments,  water  rents  and  accrued  interest  amount  to  so  large 
a  proportion  of  the  value  of  the  property  that  the  security  is  in- 
sufficient to  attract  bidders,  in  that  event  the  comptroller  and  the 
corporation  counsel  shall  investigate  the  facts  and  fix  such  an 
amount  less  than  the  total  amount  of  the  taxes,  assessments,  water 
rents  and  accrued  interest,  for  which  in  their  judgment  a  tax  lien 
bearing  twelve  per  centum  interest  can  be  sold.  They  shall  forth- 
with file  a  certificate  in  writing  signed  by  them  with  the  collector 
of  assessments  and  arrears,  setting  forth  the  amount  so  deter- 
mined by  them,  together  with  a  brief  statement  of  the  reasons  for 
such  determination  which  shall  include  the  total  amount  of  the 
taxes,  assessments,  water  rents  and  accrued  interest,  the  assessed 
value  of  such  parcel  of  real  estate,  and  the  value  of  the  land  as 
the  same  appears  on  the  last  preceding  assessment  roll.  The  col- 
lector of  assessments  and  arrears  shall  forthwith  advertise  a  tax 
lien  for  the  amount  so  determined  for  sale  to  the  highest  bidder 
in  the  manner  provided  for  the  advertisement  for  the  sale  of 
ordinary  tax  liens.  Such  tax  lien  shall  bear  interest  at  twelve  per 
centum  and  shall  be  sold  to  the  person  who  shall  bid  the  highest 
amount  of  money  in  excess  of  the  amount  fixed  by  the  comptroller 
and  corporation  counsel.  If  no  bid  shall  be  received  at  such  sale, 
the  comptroller  and  corporation  counsel  shall  reconsider  their  de- 
termination and  file  a  certificate  in  the  manner  heretofore  pro- 
vided, and  the  collector  of  assessments  and  arrears  shall  proceed 
as  heretofore  directed.  This  procedure  shall  be  repeated  until  a 
tax  lien  for  such  taxes,  assessments,  water  rents  and  accrued  in- 
terest shall  be  sold. 


23 

Section  20.  Section  1050  of  the  said  law  is  hereby  renum- 
bered so  as  to  be  section  1034,  and  is  amended  so  as  to  be  read  as 

follows : 

Lost  [certificate]  tax  lien  :  delivery  of  [lease]  dupli- 
cate in  case  of. 

§  1034.  Whenever  any  (certificate)  tax  lien  given  by  the 
collector  of  assessments  and  arrears,  as  in  this  title  provided,  [of 
lands  sold]  shall  be  lost,  the  said  comptroller  may  receive  evi- 
dence of  such  loss,  and  on  satisfactory  proof  of  the  fact  may  ex- 
ecute and  deliver  a  [lease]  duplicate  to  such  person  or  persons 
who  shall  appear  entitled  thereto  [of  the  lands  and  tenements 
described  in  the  certificate],  and  may  also,  in  his  discretion,  re- 
quire a  bond  of  indemnity  to  The  City  of  New  York.  [Each 
certificate  shall  be  registered  in  thq  record  of  sales  to  be  kept  in 
the  bureau  of  said  collector  of  assessments  and  arrears,  and  no 
transfer  of  such  certificate  shall  be  valid  until  registered  in  said 
book.] 

Section  21.  Section  1051  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1035,  and  is  amended  so  as  to  read  as  follows : 

Bills  of  arrears  of  taxes  and  assessments  to  be  furnished 
when  requested. 

§  1035.  The  collector  of  assessments  and  arrears  upon  the 
requisition  of  any  person,  shall  furnish  a  bill  of  all  arrears  of 
taxes,  and  of  taxes  with  the  "water  rents"  added  on  any  lot  or 
lots  due  prior  to  the  first  of  June,  then  last  past,  and  of  assess- 
ments which  are  due  and  payable  [including  the  amount  necessary 
to  redeem  it  or  them,  if  it  or  they  have  been  sold  for  any  arrears 
of  assessments,  taxes  or  water  rents  and  be  yet  redeemable] ;  and 
upon  the  payment  of  the  said  bill  which  shall  be  called  a  "bill  of 
arrears  and  assessments,  taxes  and  water  rents,"  [and  for  re- 
demption] his  receipt  thereon,  countersigned  by  the  comptroller, 
shall  be  conclusive  evidence  of  such  payment.    The  comptroller 


24 

shall  cause  to  be  kept  a  duplicate  account  of  amounts  so  collected, 
and  the  certificate  of  the  collector  of  assessments  and 
arrears,  countersigned  by  the  comptroller,  that  there  are 
no  such  liens  on  said  lot  or  lots,  shall  forever  free 
the  said  lot  or  lots  from  all  liens  of  taxes,  or  for  taxes  with  water 
rates  added,  or  for  rents  of  water  added  to  the  taxes  prior  to  the 
first  of  June  then  last  past,  and  for  all  assessments  due  and  payable 
prior  to  the  date  of  the  said  receipt  or  certificate,  not  including, 
however,  the  lien  of  any  tax  lien  duly  sold  [and  from  all  liens  in 
consequence  of  sales  for  assessments,  taxes,  or  water  rents,  or 
for  all  of  them,  when  the  time  allowed  by  law  for  redemption  had 
not  expired  at  the  date  or  time  of  said  paymenf  or  certificate]. 

Section  22.  Section  1052  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1036. 

Section  23.     Section  1053  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1037  and  is  amended  so  as  to  read  as  follows : 
Complete  record  of  sales  of  tax  liens  to  be  kept. 

§  1037.  There  shall  be  kept  in  the  office  of  the  collector  of 
assessments  and  arrears  a  record  of  all  [sales]  tax  liens  sold 
[made]  for  taxes,  assessments  and  water  rents,  which  record 
shall  show  [the  amount  of  the  tax.  the  assessment  and  the  water 
rents,  a  description  of  the  premises  sold,  the  date  of  the  sale,  the 
name  of  the  person  to  wliom  sold,  the  term  of  yeafs  for  which 
such  property  was  sold,  time  of  the  delivery  of  the  lease,  to  whom 
delivered,  and  when  the  same  shall  expire.]  the  name  of  the  owner 
of  record  of  the  property  covered  by  each  tax  lien  and  of  the  per- 
son to  whom  it  is  pa\able.  the  aggregate  amount  of  the  lien  there- 
bv  secured  and  the  items  of  which  it  is  composed  with  their  dates 
and  accrued  interest  and  penalties  separately  stated,  the  rate  of 
interest,  the  date  of  execution,  the  due  date  and  an  identifying  de- 
scription  of  the  property.  All  transfers  and  cancellations  of  tax 
liens  shall  be  registered  in  said  record  and  no  transfer  not  so 


C\ 


25 

registered  shall  be  valid,  as  against  a  bona  fide  purchaser  for 
value  without  notice. 

Section  24.     Section  1054  of  said  law  is  hereby  renumbered 
so  as  to  be  section  1038. 

Section  25.  Said  law  is  hereby  amended  by  adding  thereto 
a  new  section  to  be  numbered  1039  ^"d  to  read  as  follows : 

Reimbursement  in  Case  Tax  Lien  is  Cancelled  or  Reduced. 

§  1039.  If  any  tax  lien  shall  be  vacated  or  cancelled,  the 
owner  of  such  tax  lien  shall  be  reimbursed  by  the  city  the  amount 
of  said  tax  lien  with  interest  thereon  to  the  date  of  such  reim- 
bursement. Inaccuracy  in  the  calculation  of  the  amount  of  a  tax 
lien  shall  not  render  the  lien  void,  but  if  said  amount  shall  be 
found  to  be  excessive  the  excess  shall  be  repaid  to  the  purchaser, 
his  legal  representatives  or  assigns,  with  interest  thereon  from  the 
lime  of  payment,  and  the  tax  lien  and  the  record  thereof  shall  be 
corrected  accordingly. 

Section  26.  This  act  shall  not  affect  or  impair  anv  act  done 
or  right  accruing,  accrued  or  acquired,  or  penalty  or  forfeiture  in- 
curred prior  to  the  time  when  this  Act  takes  eflfect,  or  by  virtue 
of  any  section  of  the  Greater  N^ew  York  Charter  repealed  or  modi- 
fied by  this  Act;  but  the  same  may  be  asserted,  enforced,  prose- 
cuted or  inflicted  as  fully  and  to  the  same  extent  as  if  this  Act  had 
not  been  passed  or  said  sections  had  not  been  repealed  or  modified  ; 
and  all  actions,  suits,  proceedings  or  prosecutions  under  the  sec- 
tions of  Title  5  of  Chapter  XVII.  of  the  Greater  New  York 
Charter  hereby  repealed  or  modified  and  pending  when  this  Act 
takes  effect  may  be  prosecuted  and  defended  to  final  eflfect  in  the 
same  manner  as  they  might  prior  to  the  time  when  this  Act  takes 
eflfect. 

Section  27.     This  Act  shall  take  eflfect  January  first,  1908. 


j6 

Tax  Liens  Made  Legal  Investments  for  Savings  Banks. 
In  order  that  there  may  be  as  wide  a  market  as  possible  for 
the  sale  of  Tax  Liens,  it  is  proposed  that  they  shall  be  a  legal  in- 
vestment for  Savings  Banks.     The  following  Bill  is.  therefore, 
proposed  to  accomplish  this  object : 

An  Act  to  amend  the  Tianking  Law  by  providing  that  tax  liens 
of  The  City  of  New  York  shall  be  lawful  investments  for 
savings  banks. 
The  People  of  the  State  of  Xeu  York,  represented  in  Senate 
and  Assembly,  do  enact  as  foUoK's: 

Section  i.  Subdivision  four  of  section  one  hundred  sixteen 
of  Chapter  689  of  the  Laws  of  1892,  being  Chapter  thirty-seven 
of  the  General  Laws,  as  amended  by  Chapter  three  hundred  twen- 
tv-eight  of  the  Laws  of  1903,  is  hereby  amended  so  as  to  read  as 
follows : 

A.  In  such  tax  liens  of  The  Citv  of  New  York  as  do  not  ex- 
ceed half  the  assessed  value  of  the  real  estate  encumbered  thereby. 
in  the  stocks  or  bonds  of  any  city,  county,  town  or  village,  school 
district  bonds  and  union  free  school  district  bonds  issued  for 
school  purposes,  or  in  the  interest  bearing  obligations  of  any  city, 
countv.  town  or  village  of  this  state,  issued  pursuant  to  the 
authority  of  anv  law  of  the  state  for  the  payment  of  which  the 
faith  and  credit  of  the  municipality  issuing  them  are  pledged. 

Section  2.    This  act  shall  take  effect  the  first  day  of  January, 
iyo8. 

l>ROPOSED     REPORT    ON    PERSONAL    PROPERTY 

TAXATION. 

The  personal  property  tax  is  a  farce.  It  falls  inequitably  upon 
the  coniparativelv  few  who  are  caught.  The  burden  it  imposes 
upon  production  is  out  of  all  proportion  to  the  revenue  it  pro- 
duces. Year  after  year  state  and  local  assessing  boards  have  de- 
nounced as  impracticable  in  its  workings  and  unjust  in  its  results. 


27 

These  recommendations  have  for  the  most  part  passed  unheeded 
or  have  led  to  ineffectual  attempts  to  bolster  up  the  law.  It  is  time 
the  situation  was  faced  stjuarely,  and  the  tax  in  its  present  form 
abolished. 

Manufacturers  and  merchants  should  have  at  least  as  much 
relief  as  has  been  given  financiers.  The  state  has  made  flat  taxes 
for  banks  and  trust  companies  and  for  mortgages,  lower  in  rate 
than  the  taxes  to  which  such  property  was  fonnerly  liable.  What 
is  even  more  important,  these  taxes  fall  upon  each  class  with 
certainty  and  without  discrimination.  It  is  generally  admitted 
that  the  annual  tax  on  mortgages  of  one  half  of  one  per  cent  was 
a  check  to  building  and  an  undue  burden  upon  improvers.  What 
then  must  be  the  effect  on  trade  of  taxes  upon  commerce  and 
manufactures,  which  are  one  and  a  half  per  cent,  in  this  city,  and  in 
other  cities  of  the  state  still  greater? 

The  City  of  New  York  is  fast  becoming  the  greatest  city  of 
the  world  in  population  and  in  wealth.  P.ut  this  is  in  spite  of  fool- 
ish tax  laws  and  not  because  of  wise  ones.  Its  growth  has  been 
clue  largely  to  its  location,  and  its  supremacy  is  financial  rather 
than  industrial.  Its  industries  and  its  trade  should  be  relieved 
from  the  handicap  now  laid  upon  tliem.  and  the  commercial 
growth  of  the  city  should  keep  pace  with  its  development  on  other 
lines.  The  manufacturers  who  go  to  other  states  should  be  en- 
couraged to  come  and  to  stay  in  the  city,  or  at  least  in  the  State 

of  New  York. 

Millions  of  dollars  are  being  spent  upon  improved  transporta- 
tion facilities,  so  that  our  fast  increasing  population  can  find 
proper  homes.  While  we  are  justly  proud  of  the  city's  growth, 
still  we  must  remember  that  it  is  one-sided.  The  increase  is 
largely  of  clerical  and  office  help,  working  in  Manhattan  and  seek- 
ing homes  in  the  other  boroughs.  If  the  same  kind  of  growth 
continues,  it  is  inevitable  that  a  great  many  more  workers  will 
seek  homes  in  New  Jersey.    If  we  had  our  fair  quota  of  mechan- 


28 

ics  and  factory  hands  we  would  double  and  treble  the  value  of 
our  lands,  and  the  increase  in  population  would  be  more  evenly 
distributed,  for  such  workers  would  reside  near  their  employ- 
ment and  within  the  state.    The  area    within  our  own  city  limits 
could  contain  many  times  our  preseht  population,  and  give  room 
to  many  times  its  present  industries.     While  it  is  true  that  land 
on  Manhattan  Island  is  too  valuable  to  be  used  for  most  kinds  of 
heavy  manufacturing,  there  is  plenty  of  low-priced  land  available 
elsewhere  within  the  city  limits.    With  Long  Island  connected  by 
rail  with  the  main  land  and  with  improved  facilities  for  freight- 
age by  water,  there  is  no  reason  but  taxation  why  Queens  County 
should  not  become  as  thriving  a  manufacturing  centre  as  Newark. 
The  State  of  New  Jersey  in  its  Industrial  Directory,  setting 
forth  the  advantages  offered  to  manufacturers,  assures  them  that 
"Everywhere  throughout  the  state  the  policy  pursued  in  taxing 
manufacturing  plants  is,  very  wisely,  a  most  liberal  one.  The  value 
placed  on  such  property  by  assessors  is  often  no  greater  than 
25  per  cent,  and  seldom  above  $7;  per  cent,  of  its  true  cost."  This 
year  the  policy  of  assessing  real  estate  at  full  value  in  New  Jersey 
has  reduced  the  ratio  of  personal  property  assessed  to  the  total 
assessment,  from  16  per  cent,  to  10  per  cent.    As  a  result  of  this 
large  exemption  to  manufacturing  industries  the  railroad  lines 
from  Jersey  City  to  Trenton  and  Paterson  are  becoming  a  con- 
tinuous row  of  factories.     The  seven  .counties  adjacent  to  New- 
York  have  increased  16  per  cent,  in  population  in  the  last  five 
years. 

In  that  period  the  capital  invested  in  manufactures  in  New- 
Jersey  has  increased  50  per  cent.,  and  the  value  of  the  annual 
products  40  per  cent.;  while  in  The  City  of  New  York  the 
invested  capital  increased  only  22  per  cent,  and  the  products 
only  30  per  cent. 

Pennsylvania,  that  has  never  taxed  the  goods  or  other  per- 
sonal property  of  manufacturers,  is  increasing  its  capital  and 


29 

products  faster  than  New  York,  especially  in  the  districts  outside 
the  larger  cities.  A  very  large  proportion  of  industries  in  The 
City  of  New  York  are  so  small  as  to  escape  taxation,  and  it  is 
the  aggregate  value  of  their  products  that  makes  this  the  great- 
est manufacturing  city  of  the  United  States. 

If  the  personal  property  tax  has  not  been  so  great  a  handi- 
cap upon  merchants  as  upon  manufacturers,  this  is  because  the 
merchants  have  more  readily  evaded  it.  If  it  could  be  thor- 
oughly enforced  our  merchants  would  have  to  increase  prices 
and  so  lose  a  large  part  of  their  trade,  or  their  profits  would 
be  decreased  so  that  many  of  them  would  be  driven  elsewhere. 
But  to  the  extent  to  which  it  is  enforced  the  tax  upon  merchan- 
dize hinders  commerce.  It  falls  most  heavily  upon  the  most 
conscientious,  and  thus  penalizes  the  type  of  merchant  upon 
whom  must  rest  the  reputation  of  the  city  for  business  integrity. 
We  recognize  the  folly  of  those  European  cities  which  by  octroi 
duties  upon  merchandize  increase  the  cost  of  living  to  their 
inhabitants,  but  we  still  endure  a  system  of  taxation,  which, 
though  more  indirect,  just  as  surely  increases  the  cost  of  goods 
to  the  consumer. 

So  far  as  the  personal  property  tax  attempts  to  reach  intan- 
gible forms  of  wealth,  its  administration  is  so  comical  as  to  have 
become  a  by-wcrd.  In  practice  it  has  come  to  be  merely  a  requi- 
sition by  the  board  of  assessors  upon  leading  citizens  for  such 
donations  as  assessors  think  should  be  made,  and  is  paid  as 
assessed,  or  reduced,  according  as  the  citizen  agrees  with  the 
estimate  of  the  assessor.  Such  a  method  of  collecting  revenue 
would  be  a  serious  menace  to  democratic  institutions  were  it 
not  so  generally  recognized  as  a  howling  farce. 

But  it  is  not  a  farce  to  those  who  are  fully  assessed.  These 
are  chiefly  the  widows  and  orphans  who  are  caught  when  their 
property  is  listed  in  the  probate  court,  and  the  small  investors 
who  are  not  skillful  enough  to  make  non-taxable  investments. 


30 

The  tax  of  i>l  per  cent,  is  equivalent  to  an  income  tax  of  25 
per  cent,  on  a  6  per  cent,  investment.  A  general  income  tax  of 
10  per  cent,  would  create  a  revolution — yet  we  take  a  quarter 
of  their  income  or  more  from  the  most  helpless  class  in  the 
community. 

The  attempt  to  assess  all  forms  of  property  by  one  method 
and  tax  them  at  one  rate  is  unsuited  to  modern  conditions.  It 
was  long  ago  abandoned  in  Europe  and  has  been  modified  in 
this  State.  The  city  should  have  the  power  to  make  further 
alterations  and  to  classify  property  for  taxation,  subject  only  to 
the  restriction  that  taxes  shall  be  uniform  upon  all  property  of 
the  same  class.  The  modifications  that  it  may  be  necessary  and 
wise  to  make  need  not  now  be  discussed.  The  essential  matter 
is  that  we  recognize  the  inequalities  of  the  present  system  and 
obtain  the  legal  authority  to  change  it. 

Whatever  may  be  the  economic  merits  or  defects  of  the 
State  system  of  special  taxes,  there  is  no  longer  need  for  the  State 
to  dictate  to  any  community  the  method  of  raising  its  local 
revenues.  The  abolition  of  the  direct  State  tax  upon  real  and 
personal  property  removes  the  only  practical  objection  to  home 
rule  in  taxation. 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND   REVENUE 


ON 


PERSONAL   PROPERTY 
TAXATION. 


December,  1906. 


Nhw  York  : 

MARTIN  B.  BROWN  COMPANY,  PRIVTERS  AMD    SIATIONERS 

Nos.  49  TO  57  Park  Plack. 


1906, 


Chairman, 
Edgar  J.  Levey. 


Committee  on  Taxation  and  Revenue. 

Lawson  Purdy.  *  Morris  K.  Tesup^ 

Francis  Lynde  Stetson,  Joseph  Haag, 

Edwin  R.  A.  Seligman. 


Committee  on  The  City  Debt  and  Special  Assessments. 

Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  John  J.  Delany, 

Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


li 


REPORT  ON  PERSONAL  PROPERTY  TAXATION. 


Hon.  George  B.  McClellan, 

Mayor  of  The  City  of  Neiv  York, 
City  Hall,  New  York: 

Dear  Sir— At  an  early  day  a  special  tax  commission  will 
report  to  the  Legislature  and  its  recommendations  may  be  of  vital 
importance  to  The  City  of  New  York.  As  the  greatest  city  of  the 
United  States,  New  York  has  the  most  complex  and  delicate  com- 
mercial and  financial  organization.  It  is  moreover  in  very  close 
touch  with  other  States  to  which  persons  and  property  can  easily 
withdraw  if  tax  burdens  are  unwisely  imposed.  Under  these  cir- 
cumstances  the  people  of  New  York  are  all  deeply  concerned  in 
the  taxation  of  movable  property. 

The  personal  property  tax  is  a  farce.  It  falls  inequitably  upon 
the  comparatively  few  who  are  caught.  The  burden  it  imposes 
upon  production  is  out  of  all  proportion  to  the  revenue  it  pro- 
duces. Year  after  year  state  and  local  assessing  boards  have  dc- 
nouncecfas  impracticable  in  its  workings  and  unjust  in  its  results. 

A 

These  recommendations  have  for  the  most  part  passed  unheeded 
or  have  led  to  ineffectual  attempts  to  bolster  up  the  law.  It  is  time 
the  situation  was  faced  squarely,  and  the  tax  in  its  present  form 
abolished. 

Manufacturers  and  merchants  should  have  at  least  as  much 
relief  as  has  been  given  financiers.  The  state  has  made  flat  taxes 
fof  banks  and  trust  companies  and  for  mortgages,  lower  in  rate 
than  the  taxes  to  which  such  property  was  formerly  liable.  What 
is  even  more  important,  these  taxes  fall  upon  each  class  with 
certainty  and  without  discrimination.     It  is  generally  admitted 


that  the  annual  tax  on  mortgages  of  one  half  of  one  per  cent  was 
a  check  to  building  and  an  undue  burden  upon  improvers.  What 
then  must  be  the  effect  on  trade  of  taxes  upon  commerce  and 
manufactures,  which  are  one  and  a  half  per  cent,  in  this  city,  and  in 
other  cities  of  the  state  still  greater? 

The  City  of  New  York  is  fast  becoming  the  greatest  city  of 
the  world  in  population  and  in  wealth.  But  this  is  in  spite  of  fool- 
ish tax  laws  and  not  because  of  wise  ones.  Its  growth  has  been 
due  largely  to  its  location,  and  its  supremacy  is  financial  rather 
than  industrial.  Its  industries  and  its  trade  should  be  relieved 
from  the  handicap  now  laid  upon  them,  and  the  commercial 
growth  of  the  city  should  keep  pace  with  its  development  on  other 
lines.  The  manufacturers  who  go  to  other  states  should  be  en- 
couraged to  come  and  to  stay  in  the  city,  or  at  least  in  the  State 
of  New  York. 

Millions  of  dollars  are  being  spent  upon  improved  transporta- 
tion facilities,  so  that  our  fast  increasing  population  can  find 
proper  homes.  While  we  are  justly  proud  of  the  city's  growth, 
still  we  must  remember  that  it  is  one-sided.  The  increase  is 
largely  of  clerical  and  office  help,  working  in  Manhattan  and  seek- 
ing homes  in  the  other  boroughs.  If  the  same  kind  of  growth 
continues,  it  is  inevitable  that  a  great  many  more  workers  will 
seek  homes  in  New  Jersey.  If  we  had  our  fair  quota  of  mechan- 
ics and  factory  hands  we  would  double  and  treble  the  value  of 
our  lands,  and  the  increase  in  population  would  be  more  evenly 
distributed,  for  such  workers  would  reside  near  their  employ- 
ment and  within  the  state.  The  area  within  our  own  city  limits 
could  contain  many  times  our  present  population,  and  give  room 
to  many  times  its  present  industries.  While  it  is  true  that  land 
on  Manhattan  Island  is  too  valuable  to  be  used  for  most  kinds  of 
heavy  manufacturing,  there  is  plenty  of  low-priced  land  available 
elsewhere  within  the  city  limits.  With  Long  Island  connected  by 
rail  with  the  main  land  and  with  improved  facilities  for  freight- 


Li  J  g  11*  ja 


age  by  water,  there  is  no  reason  but  taxation  why  Queens  County 
should  not  become  as  thriving  a  manufacturing  centre  as  Newark. 
The  State  of  New  Jersey  in  its  Industrial  Directory,  setting 
forth  the  advantages  offered  to  manufacturers,  assures  them  that 
"Everywhere  throughout  the  state  the  policy  pursued  in  taxing 
manufacturing  plants  is,  very  wisely,  a  most  liberal  one.  The  value 
placed  on  such  property  by  assessors  is  often  no  greater  than 
25  per  cent,  and  seldom  above  33  per  cent,  of  its  true  cost."  This 
year  the  policy  of  assessing  real  estate  at  full  value  in  New  Jersey 
has  reduced  the  ratio  of  personal  property  assessed  to  the  total 
assessment,  from  16  per  cent,  to  10  per  cent.  As  a  result  of  this 
large  exemption  to  manufacturing  industries  the  railroad  lines 
from  Jersey  City  to  Trenton  and  Paterson  are  becoming  a  con- 
tinuous  row  of  factories.  The  seven  counties  adjacent  to  New 
York  have  increased  16  per  cent,  in  population  in  the  last  five 
years. 

In  that  period  the  capital  invested  in  manufactures  in  New 
Jersey  has  increased  50  per  cent.,  and  the  value  of  the  annual 
products  40  per  cent.;  while  in  The  City  of  New  York  the 
invested  capital  increased  only  22  per  cent,  and  the  products 
only  30  per  cent. 

Pennsylvania,  that  has  never  taxed  the  goods  or  other  per- 
sonal property  of  manufacturers,  is  increasing  its  capital  and 
products  faster  than  New  York,  especially  in  the  districts  outside 
the  larger  cities.  A  very  large  proportion  of  industries  in  The 
City  of  New  York  are  so  small  as  to  escape  taxation,  and  it  is 
the  aggregate  value  of  their  products  that  makes  this  the  great- 
est manufacturing  city  of  the  United  States. 

If  the  personal  property  tax  has  not  been  so  great  a  handi- 
cap upon  merchants  as  upon  manufacturers,  this  is  because  the 
merchants  have  more  readily  evaded  it.  If  it  could  be  thor- 
oughly enforced  our  merchants  would  have  to  increase  prices 
and  so  lose  a  large  part  of  their  trade,  or  their  profits  would 


8 


1i 


N 


be  decreased  so  that  many  of  them  would  be  driven  elsewhere. 
But  to  the  extent  to  which  it  is  enforced  the  tax  upon  merchan- 
dize hinders  commerce.  It  falls  most  heavily  upon  the  most 
conscientious,  and  thus  penalizes  the  type  of  merchant  upon 
whom  must  rest  the  reputation  of  the  city  for  business  integrity. 
We  recognize  the  folly  of  those  European  cities  which  by  octroi 
duties  upon  merchandize  increase  the  cost  of  living  to  their 
inhabitants,  but  we  still  endure  a  system  of  taxation,  which, 
though  more  indirect,  just  as  surely  increases  the  cost  of  goods 

to  the  consumer. 

So  far  as  the  personal  property  tax  attempts  to  reach  intan- 
gible forms  of  wealth,  its  administration  is  so  comical  as  to  have 
become  a  by-word.  In  practice  it  has  come  to  be  merely  a  requi- 
sition by  the  board  of  assessors  upon  leading  citizens  for  such 
donations  as  assessors  think  should  be  made,  and  is  paid  as 
assessed,  or  reduced,  according  as  the  citizen  agrees  with  the 
estimate  of  the  assessor.  Such  a  method  of  collecting  revenue 
would  be  a  serious  menace  to  democratic  institutions  were  it 
not  so  generally  recognized  as  a  howling  farce. 

But  it  is  not  a  farce  to  those  who  are  fully  assessed.  These 
are  chiefly  the  widows  and  orphans  who  are  caught  when  their 
property  is  listed  in  the  probate  court,  and  the  small  investors 
who  are  not  skillful  enough  to  make  non-taxable  investments. 
The  tax  of  i>^  per  cent,  is  equivalent  to  an  income  tax  of  25 
per  cent,  on  a  6  per  cent,  investment.  A  general  income  tax  of 
10  per  cent,  would  create  a  revolution-yet  we  take  a  quarter 
of  their  income  or  more  from  the  most  helpless  class  in  the 

community. 

The  attempt  to  assess  all  forms  of  property  by  one  method 
and  tax  them  at  one  rate  is  unsuited  to  modern  conditions.  It 
was  long  ago  abandoned  in  Europe  and  has  been  modified  in 
this  State.  The  city  should  have  the  power  to  make  further 
alterations  and  to  classify  property  for  taxation,  subject  only  to 


the  restriction  that  taxes  shall  be  uniform  upon  all  property  of 
the  same  class.  The  modifications  that  it  may  be  necessary  and 
wise  to  make  need  not  now  be  discussed.  The  essential  matter 
is  that  we  recognize  the  inequalities  of  the  present  system  and 
obtain  the  legal  authority  to  change  it. 

Whatever  may  be  the  economic  merits  or  defects  of  the 
State  system  of  special  taxes,  there  is  no  longer  need  for  the  State 
to  dictate  to  any  community  the  method  of  raising  its  local 
revenues.  The  abolition  of  the  direct  State  tax  upon  real  and 
personal  property  removes  the  only  practical  objection  to  home 
rule  in  taxation. 

Your  Commission  respectfully  represents  that  this  question  is 
of  immediate  importance  to  the  City  and  presents  for  your  consid- 
eration the  desirability  of  bringing  the  matter  to  the  attention  of 
the  Governor  and  State  Legislature. 


1^ 


■iL_ 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance 


REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND  REVENUE 


ON 


PERSONAL  PROPERTY 
TAXATION. 


January  2,  1907. 


New  York  : 

MARTIN  B.  BROWN  COMPANY,  PRINTERS  AND   STATIONERS 

Nos.  49  TO  57  Park  Placb. 

1907. 


H 


»  ll 


I 


Chairman. 


Edgar  J.  Levey. 


Committee  on  Taxation  and  Revenue. 

Lawson  Purdy.  Morris  K.  Jesup. 

Francis  Lynde  Stetson,  Joseph  Haag, 

Edwin  R.  A.  Seligman. 


Committee  on  The  City  Debt  and  Special  Assessments. 

Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  John  J.  Delany, 

Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


/ 


i 


I 


■jL. 


m 


January  2,  1907. 
Hon.  George  B.  McClellan, 

Mayor  of  The  City  of  New  York, 
City  Hall,  New  York. 

Dear  Sir — At  a  meeting  of  your  Advisory  Commission  on 
Taxation  and  Finance,  held  the  2d  day  of  January,  1907,  the  fol- 
lowing resolution  was  adopted: 

"Resolved,  That  the  report  of  the  Committee  on  Taxation 
and  Revenue  on  Personal  Property  Taxation  be  and  hereby  is 
accepted  and  adopted  as  a  report  of  this  Commission,  and  that  it 
be  transmitted  to  the  Mayor  as  a  partial  report  of  this  Com- 
mission." 

As  directed  by  the  Commission  we  transmit  herewith  the  fol- 
lowing report : 

REPORT  ON  PERSONAL  PROPERTY  TAXATION. 

At  an  early  day  a  special  tax  commission  will  report  to  the 
Legislature  and  its  recommendations  may  be  of  vital  importance 
to  The  City  of  New  York.  As  the  greatest  city  of  the  United 
States,  New  York  has  the  most  complex  and  delicate  commer- 
cial and  financial  organization.  It  is  moreover  in  ver>^  close 
touch  with  other  States  to  which  persons  and  property  can  easily 
withdraw  if  tax  burdens  are  unwisely  imposed.  Under  these  cir- 
cumstances the  people  of  New  York  are  all  deeply  concerned  in 
the  taxation  of  movable  property. 

The  personal  property  tax  is  a  farce.  It  falls  inequitably  upon 
the  comparatively  few  who  are  caught.  The  burden  it  imposes 
upon  production  is  out  of  all  proportion  to  the  revenue  it  pro- 
duces.   Year  after  year  state  and  local  assessing  boards  have  de- 


nounced  it  as  impracticable  in  its  workings  and  unjust  in  its 
results.  These  recommendations  have  for  the  most  part  passed 
unheeded  or  have  led  to  ineffectual  attempts  to  bolster  up  the  law. 
It  is  time  the  situation  was  faced  squarely,  and  the  tax  in  its 
present  form  abolished. 

Manufacturers  and  merchants  should  have  at  least  as  much 
relief  as  has  been  given  financiers.  The  state  has  made  flat  taxes 
for  banks  and  trust  companies  and  for  mortgages,  lower  in  rate 
than  the  taxes  to  which  such  property  was  formerly  liable.  What 
is  even  more  important,  these  taxes  fall  upon  each  class  with 
certainty  and  without  discrimination.  It  is  generally  admitted 
that  the  annual  tax  on  mortgages  of  one  half  of  one  per  cent  was 
a  check  to  building  and  an  undue  burden  upon  improvers.  What 
then  must  be  the  effect  on  trade  of  taxes  upon  commerce  and 
manufactures,  which  are  one  and  a  half  per  cent,  in  this  city,  and  in 
other  cities  of  the  state  still  greater? 

The  City  of  New  York  is  fast  becoming  the  greatest  city  of 
the  world  in  population  and  in  wealth.  But  this  is  in  spite  of  fool- 
ish tax  laws  and  not  because  of  wise  ones.  Its  growth  has  been 
due  largely  to  its  location,  and  its  supremacy  is  financial  rather 
than  industrial.  Its  industries  and  its  trade  should  be  relieved 
from  the  handicap  now  laid  upon  them,  and  the  commercial 
growth  of  the  city  should  keep  pace  with  its  development  on  other 
lines.  The  manufacturers  who  go  to  other  states  should  be  en- 
couraged to  come  and  to  stay  in  the  city,  or  at  least  in  the  State 
of  New  York. 

Millions  of  dollars  are  being  spent  upon  improved  transporta- 
tion facilities,  so  that  our  fast  increasing  population  can  find 
proper  homes.  While  we  are  justly  proud  of  the  city's  growth, 
still  we  must  remember  that  it  is  one-sided.  The  increase  is 
largely  of  clerical  and  office  help,  working  in  Manhattan  and  seek- 
ing homes  in  the  other  boroughs.  If  the  same  kind  of  growth 
continues,  it  is  inevitable  that  a  great  many  more  workers  will 


seek  homes  in  New  Jersey.  If  we  had  our  fair  quota  of  mechan- 
ics and  factory  hands  we  would  double  and  treble  the  value  of 
our  lands,  and  the  increase  in  population  would  be  more  evenly 
distributed,  for  such  workers  would  reside  near  their  employ- 
ment and  within  the  state.  The  area  within  our  own  city  limits 
could  contain  many  times  our  present  population,  and  gfive  room 
to  many  times  its  present  industries.  While  it  is  true  that  land 
on  Manhattan  Island  is  too  valuable  to  be  used  for  most  kinds  of 
heavy  manufacturing,  there  is  plenty  of  low-priced  land  available 
elsewhere  within  the  city  limits.  With  Long  Island  connected  by 
rail  with  the  main  land  and  with  improved  facilities  for  freight- 
age by  water,  there  is  no  reason  but  taxation  why  Queens  County 
should  not  become  as  thriving  a  manufacturing  centre  as  Newark. 

The  State  of  New  Jersey  in  its  Industrial  Directory,  setting 
forth  the  advantages  offered  to  manufacturers,  assures  them  that 
"Everywhere  throughout  the  state  the  policy  pursued  in  taxing 
manufacturing  plants  is,  very  wisely,  a  most  liberal  one.  The  value 
placed  on  such  property  by  assessors  is  often  no  greater  than 
25  per  cent,  and  seldom  above  33  per  cent,  of  its  true  cost."  This 
year  the  policy  of  assessing  real  estate  at  full  value  in  New  Jersey 
has  reduced  the  ratio  of  personal  property  assessed  to  the  total 
assessment,  from  16  per  cent,  to  10  per  cent.  As  a  result  of  this 
large  exemption  to  manufacturing  industries  the  railroad  lines 
trom  Jersey  City  to  Trenton  and  Paterson  are  becoming  a  con- 
tinuous row  of  factories.  The  seven  counties  adjacent  to  New 
York  have  increased  16  per  cent,  in  population  in  the  last  five 
years. 

In  that  period  the  capital  invested  in  manufactures  in  New 
Jersey  has  increased  50  per  cent.,  and  the  value  of  the  annual 
products  40  per  cent.;  while  in  The  City  of  New  York  the 
invested  capital  increased  only  22  per  cent,  and  the  products 
only  30  per  cent. 

Pennsylvania,  that  has  never  taxed  the  goods  or  other  per- 


8 


i 

I  ! 


i 
li 


J 


.1 

I 

■K 
"f 

I 


sonal  property  of  manufacturers,  is  increasing  its  capital  and 
products  faster  than  New  York,  especially  in  the  districts  outside 
the  larger  cities.  A  very  large  proportion  of  industries  in  The 
City  of  New  York  are  so  small  as  to  escape  taxation,  and  it  Is 
the  aggregate  value  of  their  products  that  makes  this  the  great- 
est manufacturing  city  of  the  United  States. 

If  the  personal  property  tax  has  not  been  so  great  a  handi- 
cap upon  merchants  as  upon  manufacturers,  this  is  because  the 
merchants  have  more  readily  evaded  it.  If  it  could  be  thor- 
oughly enforced  our  merchants  would  have  to  increase  prices 
and  so  lose  a  large  part  of  their  trade,  or  their  profits  would 
be  decreased  so  that  many  of  them  would  be  driven  elsewhere. 
But  to  the  extent  to  which  it  is  enforced  the  tax  upon  merchan- 
dize hinders  commerce.  It  falls  most  heavily  upon  the  most 
conscientious,  and  thus  penalizes  the  type  of  merchant  upon 
whom  must  rest  the  reputation  of  the  city  for  business  integrity. 
We  recognize  the  folly  of  those  European  cities  which  by  octroi 
duties  upon  merchandize  increase  the  cost  of  living  to  their 
inhabitants,  but  we  still  endure  a  system  of  taxation,  which, 
though  more  indirect,  just  as  surely  increases  the  cost  of  goods 
to  the  consumer. 

So  far  as  the  personal  property  tax  attempts  to  reach  intan- 
gible forms  of  wealth,  its  administration  is  so  comical  as  to  have 
become  a  by-word.  In  practice  it  has  come  to  be  merely  a  requi- 
sition by  the  board  of  assessors  upon  leading  citizens  for  such 
donations  as  assessors  think  should  be  made,  and  is  paid  as 
assessed,  or  reduced,  according  as  the  citizen  agrees  with  the 
estimate  of  the  assessor.  Such  a  method  of  collecting  revenue 
would  be  a  serious  menace  to  democratic  institutions  were  it 
not  so  generally  recognized  as  a  howling  farce. 

But  it  is  not  a  farce  to  those  who  are  fully  assessed.  These 
are  chiefly  the  widows  and  orphans  who  are  caught  when  their 
property  is  listed   in  the   probate  court,   retail   merchants   and 


others,  incorporated  or  unincorporated,  with  stocks  of  goods, 
and  the  small  investors  who  are  not  skillful  enough  to  make  non- 
taxable investments.  The  tax  of  ij/^  per  cent,  is  equivalent  to 
an  income  tax  of  25  per  cent,  on  a  6  per  cent,  investment.  A 
general  income  tax  of  10  per  cent,  would  create  a  revolution — 
yet  we  take  a  quarter  of  their  income  or  more  from  the  most 
helpless  class  in  the  community. 

The  attempt  to  assess  all  forms  of  property  by  one  method 
and  tax  them  at  one  rate  is  unsuited  to  modem  conditions.  It 
was  long  ago  abandoned  in  Europe  and  has  been  modified  in 
this  State.  The  city  should  have  the  power  to  make  further 
alterations  and  to  classify  property  for  taxation,  subject  only  to 
the  restriction  that  taxes  shall  be  uniform  upon  all  property  of 
the  same  class.  The  modifications  that  it  may  be  necessary  and 
wise  to  make  need  not  now  be  discussed.  The  essential  matter 
is  that  we  recognize  the  inequalities  of  the  present  system  and 
obtain  the  legal  authority  to  change  it. 

Whatever  may  be  the  economic  merits  or  defects  of  the 
State  system  of  special  taxes,  there  is  no  longer  need  for  the  State 
to  dictate  to  any  community  the  method  of  raising  its  local 
revenues.  The  abolition  of  the  direct  State  tax  upon  real  and 
personal  property  removes  the  only  practical  objection  to  home 
rule  in  taxation. 

Your  Commission  respectfully  represents  that  this  question  is 
of  immediate  importance  to  the  City  and  presents  for  your  consid- 
eration the  desirability  of  bringing  the  matter  to  the  attention  of 
the  Governor  and  State  Legislature, 

Yours  respectfully, 

Edgar  J.  Levey^ 

Chairman, 

Lawson   Purdy, 

Secretary. 


mS^^^  :^ 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance, 


REPORT 


ON 


THE    CITY    DEBT    IN    ITS    RELATION    TO    THE    CONSTITU 

TIONAL    LIMIT    OF    INDEBTEDNESS,    CONTAINING 

A    PROPOSED    AMENDMENT  TO  SECTION  10 

OF    ARTICLE    VIIL   OF   THE    STATE 

CONSTITUTION. 


APRIL.  1907. 


New  York  : 

MARTIN  B.  BROWN  COMPANY.  PRI'JTSRS  AMD   SIATIONERSJ 

Nos.  49  TO  57  Park  Pl\c«. 

1907. 


I 


R 


ADVISORY   COMMISSION 


ON 


Taxation  and  Finance. 


Chairman, 
EDOAR  J.  LEVEY. 

Committee  on  Taxation  and  Revenue, 

Lawson  Purdy,  Francis  Lynde  Stetson, 

Edwin  R.  A.  Seligman,  Morris  K.  Jesup, 

Joseph  Haag. 

Committee  on  the  City  Debt  and  Special  Assessments, 

Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  John  J.  Delany, 

Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 
Frederick  A.  Cleveland,  Julian  D.  Fairchild, 


Herman  Kidder, 


John  Crane, 
John  C.  Hertle, 


rvucnN  b.brOW'N 

*  rRESS*/' 


Hon.  George  B.  McClellan,  Mayor: 

Sir — ^Among  the  questions  referred  by  you  to  this  Com- 
mission was  that  of  the  relation  of  the  City  debt  to  the  constitu- 
tional limitation  on  nnmicipal  indebtedness.  Section  lo  of  article 
VIII.  of  the  State  Constitution,  so  far  as  it  relates  to  municipal  in- 
debtedness, reads  as  follows : 

"  No  county  or  city  shall  be  allowed  to  become  indebted 
for  any  purpose  or  in  any  manner  to  an  amount  which, 
including  existing  indebtedness,  shall  exceed  ten  per  centum 
of  the  assessed  valuation  of  the  real  estate  of  such  county 
or  city  subject  to  taxation,  as  it  appeared  by  the  assess- 
ment-rolls of  said  county  or  city  on  the  last  assessment  for 
State  or  county  taxes  prior  to  the  incurring  of  such  in- 
debtedness ;  and  all  indebtedness  in  excess  of  such  limita- 
tion, except  such  as  may  now  exist,  shall  be  absolutely  void, 
except  as  herein  otherwise  provided.  No  county  or  city 
whose  present  indebtedness  exceeds  ten  per  centum  of  the 
assessed  valuation  of  its  real  estate  subject  to  taxation, 
shall  be  allowed  to  become  indebted  in  any  further  amount 
until  such  indebtedness  shall  be  reduced  within  such  limit. 
This  section  shall  not  be  construed  to  prevent  the  issuing 
of  certificates  of  indebtedness  or  revenue  bonds  issued  in 
anticipation  of  the  collection  of  taxes  for  amounts  actually 
contained,  or  to  be  contained,  in  the  taxes  for  the  year  when 
such  certificates  or  revenue  bonds  are  issued  and  payable 
out  of  such  taxes. 

"  Nor  shall  this  section  be  construed  to  prevent  the  issue 
of  bonds  to  provide  for  the  supply  of  water ;  but  the  term 
of  the  bonds  issued  to  provide  the  supply  of  water  shall  not 
exceed  twenty  years,  and  a  sinking  fund  shall  be  created 
on  the  issuing  of  the  said  bonds  for  their  redemption,  by 
raising  annually  a  sum  which  will  produce  an  amount  equal 
to  the  sum  of  the  principal  and  interest  of  said  bonds  at 
their  maturity.  All  certificates  of  indebtedness  or  revenue 
bonds  issued  in  anticipation  of  the  collection  of  taxes, 
which  are  not  retired  within  five  years  after  their  date  of 


(19977  G 


issue,  and  bonds  issued  to  provide  for  the  supply  of  water, 
and  any  debt  hereafter  incurred  by  any  portion  or  part  of  a 
city,  if  there  shall  be  any  such  debt,  shall  be  included  in 
ascertaining  the  power  of  the  city  to  become  otherwise  in- 
debted; except  that  debts  incurred  by  The  City  of  New 
York  after  the  first  day  of  January,  nineteen  hundred  and 
four,  to  provide  for  the  supply  of  water,  shall  not  be  so 
included.  Whenever  the  boundaries  of  any  city  are  the 
same  as  those  of  a  county,  or  when  any  city  shall  include 
within  its  boundaries  more  than  one  county,  the  power  of 
any  county  wholly  included  within  such  city  to  become  in- 
debted shall  cease,  but  the  debt  of  the  county,  heretofore 
existing,  shall  not,  for  the  purposes  of  this  section,  be 
reckoned  as  a  part  of  the  city  debt." 

Prior  to  consolidation  this  limitation  worked  no  inconvenience 
in  the  financing  of  the  City's  public  works.  In  fact,  it  may  be 
said  that  prior  to  1898  no  Comptroller  ever  concerned  himself 
with  this  constitutional  provision;  for  the  margin  between  the 
City's  net  debt  and  the  constitutional  limit  thereof  was  generally 
believed  to  be  so  large  that  it  was  hardly  regarded  as  possessing 
more  than  an  academic  interest,  until  the  litigation  preceding  the 
building  of  the  Manhattan-Bronx  subway  and  the  debt  burdens  of 
consolidation  combined  to  make  its  problems  really  vital  and 
urgent  of  solution.  Since  1898,  however,  the  financial  officers  of 
the  City  have  continually  been  forced  to  appropriate  and  to  ad- 
minister with  constant  attention  to  this  provision  of  the  constitu- 
tion. There  have  been  times  when  City  improvements  have  had 
to  be  postponed  until  by  legislation  or  by  increased  real  estate 
assessments  the  City  was  placed  in  a  position  legally  to  incur 
further  indebtedness.  An  example  of  such  relief  by  legislation 
may  be  found  in  chapter  630  of  the  Laws  of  1900. 

The  Charter  Revision  Commission  of  1900  recommended  to 
the  Legislature  that  the  Constitution  be  amended  by  providing 
that  debts  incurred  by  The  City  of  New  York  after  the  first  day 
of  January,  nineteen  hundred  and  four,  to  provide  for  the  supply 
of  water,  should  not  be  included  in  ascertaining  the  power  of  the 
City  to  become  otherwise  indebted,  and  this  amendment  to  the 
Constitution  was  approved  by  vote  of  the  people  in  November, 
1905.    It  was  believed  at  the  time  this  exception  was  made  that  it 


was  not  only  necessary,  because  of  the  large  exj>enditufes  (now 
estimated  at  $161,000,000)  required  to  furnish  the  City  with  an 
additional  and  adequate  water  supply  but  that  it  could  also  be 
made  safely  from  the  financial  point  o£  view  because  experience 
has  shown  that  the  ownership  and  operation  of  water  works  has 
been  a  source  of  net  income  rather  than  of  expense. 

The  vast  increase  both  in  area  and  population  of  The  City  of 
New  York  during  the  last  ten  years  has  brought  with  it  most 
important  problems  (especially  those  relating  to  transportation), 
the  necessity  for  solving  which  becomes  more  insistent  every  year. 
No  such  solution  is  possible  without  the  expenditure  of  large 
amounts  of  money  on  capital  account  as  well  as  by  way  of  current 
expenditure. 

The  determination  of  the  question,  how  to  make  possible  the 
necessary  capital  expenditure  within  the  limitation  prescribed  by 
our  constitution,  is  one  of  the  most  important  subjects  which  has 
been  submitted  to  this  Commission  for  its  consideration.  For  it 
is  claimed  that  notwithstanding  the  recent  amendment  of  the  Con- 
stitution relating  to  water  bonds  issued  since  1904,  the  present 
constitutional  provision  is  not  broad  enough  or  elastic  enough  to 
give  the  City  that  free  hand  in  dealing  with  the  problems  before  it 
which  is  necessary  to  their  proper  solution.  In  order  to  approach 
this  question  intelligently  it  is  necessary  to  ascertain,  first,  what, 
under  the  present  law,  will  be  the  margin  between  the  City  debt 
and  the  constitutional  limit  thereof  for  the  next  few  years;  and. 
secondly,  what  indebtedness  the  City  will  probably  be  obliged  to 
incur  during  the  same  period. 


First— Present  Margin  of  Debt-incurring  Capacity. 

The  following  is  a  summary  of  the  City  debt  as  stated  by  the 
Department  of  Finance  as  of  January  i,  1907: 

Net  funded  debt  falling  within  the  terms  of  the 

constitutional  limitation $43777 1*239  72 

Net  contract  indebtedness 57*346,337  36 

Indebtedness  for  lands  acquired 17,109,785  15 


i« 


»H'i 


6 

Indebtedness  for  judgments  (estimated) 2,000,000  00 

Revenue  bonds "• 30,295»o«>  ^ 

Total  indebtedness $544,522,362  23 

10  per  cent,  of  assessed  valuation  of  real  estate. . .   S73M^>7^4  5^ 

Balance • $29,326,362  27 

Proceeds  of  bond  sales  unapportioned 1,816,856  46 

Margin  available  January  i,  1907 $3i»i43»2i8  73 

The  foregoing  statement  requires  some  comment. 
The  item  of  revenue  bonds  in  the  above  statement,  aggre- 
gating $30,295,000,  represents  bond  issues  of  $20,155,000  in  1905 
and  1906  in  anticipation  of  the  collection  of  taxes  of  the  years 
1902,  1903  and  1904  and  issues  of  $10,140,000  in  1906  in  anticipa- 
tion of  the  collection  of  taxes  of  the  year  1905.  Some  of  these 
bonds  have  been  redeemed  since  January  i ;  more  will  be  redeemed 
in  the  near  future;  but  under  the  City's  financial  methods  such 
redemption  can  only  take  place  at  the  expense  of  special  and  trust 
accounts.  While  the  amount  of  such  revenue  bonds  outstanding 
January  i,  1907,  was  exceptionally  large,  it  still  falls  short  of  the 
estimated  amount  of  uncollectible  taxes — $36,000,000 — for  which 
the  Board  of  Estimate  and  Apportionment  have  authorized  the 
issue  of  corporate  stock  under  the  provisions  of  chapter  208,  Laws 
of  1906.  Sooner  or  later  these  latter  bonds  must  be  issued,  and 
when  issued,  this  item  of  liability  (of  capital  account  to  current 
revenue)  will  appear  for  the  first  time  in  the  City's  debt  state- 
ment. It  follows,  therefore,  that  while  the  above  statement  of  the 
City's  debt  comes  nearer  to  representing  the  City's  true  condition 
of  indebtedness  than  any  similar  statement  previously  issued, 
nevertheless  (as  we  are  now  endeavoring  to  deal  with  future  con- 
ditions) it  would  be  better  to  go  still  further,  and,  on  the  principle 
of  assuming  that  to  be  done  which  will  have  to  be  done,  make  the 
further  deduction  of  $5,705,000  from  the  foregoing  margin— this 
figure  representing  the  diftcrence  between  the  aggregate  of  the 
Revenue  Bonds  of  the  years  1902  to  1905,  inclusive,  outstanding 
January  i,  1907,  and  the  amount  of  Corporate  Stock  authorized 
to  be  issued  by  the  Board  of  Estimate  and  Apportionment  to  make 


f 

good  the  deficiency  in  the  City  Treasury,  caused  by  arrears  of 
uncollectible  taxes.  Making  this  deduction  gives  us  an  assumed 
margin  of  indebtedness  on  January  i,  1907,  of  $25,438,218.73. 

The  liability  given  in  the  above  statement  as  accruing  for  lands 
acquired  for  public  purposes  and  not  yet  paid  for  is  almost  en- 
tirely estimated.  The  obligations  accrue  when  the  City  becomes 
vested  with  the  title  to  the  property,  which  may  occur  before 
payments  are  actually  made  for  the  same.  The  original  estimate 
of  the  liability  is  based  on  tax  valuations  and  thereafter,  as  the 
condemnation  proceedings  progress,  informatic«i  is  obtained  from 
the  Law  Department  as  to  the  values  appraised  by  the  expats  in 
the  proceedings.  The  actual  obligation  for  the  property  is  not 
determined  until  the  awards  are  reported.  It  is  the  experience  of 
the  City's  financial  officers  that  the  preliminary  estimates  of  lia- 
bility covered  in  the  debt  statement  are  invariably  below  the  actual 
cost.  On  the  other  hand,  it  may  be  said  that  the  debt  statements 
prepared  by  the  Comptroller's  Office  include  certain  contract  and 
land  liabilities  for  water  purposes  which  are  not  now  required  to 
be  included  in  estimating  the  City's  debt  margin,  which  liabilities 
probably  aggregate  not  less  than  five  millions  of  dollars.  This 
factor  of  understatement  of  the  City's  debt-incurring  capacity 
may  therefore  be  treated  as  an  approximately  equal  offset  to  the 
general  underestimate  of  liability  for  lands  taken  in  condemnation 
proceedings — the  net  result  of  which  would  be  to  leave  practically 
undisturbed  the  figure  of  debt  margin  above  given,  i.  e.,  $25,438,- 
218.73. 

Second — Factors  Enlarging   the   City's  Future   Debt-incurring 

Capacity. 

(a)  The  City's  debt-incurring  capacity  is  enlarged  each  year 
by  ten  per  cent,  of  the  increase,  if  any,  of  the  assessed  valuation 
of  real  estate.  Ten  per  cent,  of  the  increases  of  the  assessed  valu- 
ation of  the  past  three  years  has  been  as  follows : 

1904 $26,399,295  30 

1905 20,595,852  20 

1906 51,698,494  40 

Average  for  three  years $32,897,880  63 


II 


8 

It  is  estimated  that  the  increase  in  real  estate  assessments  for 
1907  will  be  about  $5oo,ooo,cx)0,  ten  per  cent,  of  which  would  be 
$50,000,000.  It  is  to  be  borne  in  mind,  however,  that  the  real 
estate  assessments  in  this  City  have  of  recent  years  been  constantlj 
approaching  more  and  more  nearly  the  theoretical  limit  of  one 
hundred  per  cent.,  or  full  valuation ;  also,  that  the  past  few  years 
have  been  years  of  great  prosperity  and  enhancing  values  of  real 
estate. 

It  does  not  seem  to  your  Commission  that  in  estimating  such 
increases  in  future  years  a  higher  average  than  thirty  million 
dollars  should  be  assumed  for  this  item.  This  is,  of  course,  merely 
a  matter  of  opinion  and  can  be  nothing  more.  It  is  scarcely  con- 
ceivable, however,  that  even  under  the  stress  of  necessity  the  De- 
partment of  Taxes  and  Assessments  could  in  the  next  five  years 
maintain  an  annual  increase  in  real  estate  assessments  as  great 
as  those  of  1906  and  1907. 

{b)  Another  source  of  increase  is  that  produced  by  the  re- 
demption of  debt  from  annual  taxation  directly  and  from  local  as- 
sessments. This  will  amount  in  the  years  1907-1911,  inclusive,  to 
about  $5,500,000,  or  an  average  of  $1,100,000  annually. 

(c)  The  margin  of  indebtedness  is  also  increased  by  reason 
of  the  increase  in  the  Sinking  Funds  of  the  City.  These  funds 
are  available  for  redemption  of  debt  falling  due,  and  when  not  so 
applied  may  be  used  for  investment  in  issues  of  Corporate  Stock. 
Either  transaction  adds  to  the  City's  debt-incurring  power.  The 
average  yearly  increase  in  the  Sinking  Funds  during  the  past 
three  years  would  appear  to  be  about  eleven  million,  three  hundred 
and  fifty  thousand  dollars,  and  for  the  immediate  future  may  be 
reckoned  at  an  amount  not  exceeding  twelve  million  dollars  per 
annum.  If  we  add  this  to  the  increase  in  tax  valuations,  and  the 
annual  average  of  $1,100,000  derived  from  direct  redemption  of 
debt  from  taxation  and  assessments,  we  have  an  average  annual 
increase  in  the  available  margin  of  indebtedness  of  $43,100,000. 
In  five  years  this  would  amount  to  $215,500,000,  which,  added  to 
the  present  margin,  would  make  a  debt-incurring  capacity  during 
the  next  five  years  of  $240,938,218.73. 


9 

Third — Probable  Future  ludebtedness  to  be  Incurred. 

Some  light  may  be  thrown  on  this  subject  by  examining  the 
actual  bond  issues  during  the  past  five  years,  which  have  been  as 
follows : 

1902 $29,601,958  19 

1903 • 43,022,919  42 

1904 81,825,742  87 

1905 41,210,934  23 

1906 57,052,174  58 

Total $252,713,729  29 

Deducting  water  bonds 25,026,100  00 

$227,687,629  29 

Yearly  average $45,537,525  86 

It  has  not  been  the  custom  of  the  City  to  issue  bonds  imme- 
diately after  their  authorization  by  the  Board  of  Estimate  and 
Apportionment.  They  are  issued  only  from  time  to  time,  as  money 
is  required  for  actual  disbursement  on  account  of  public  improve- 
ments. Long  before  the  actual  issuing  of  the  bonds,  therefore, 
contracts  may  have  been  entered  into  and  certified  to  by  the  Comp- 
troller which  have  created  prej>ent  indebtedness  within  the  pur- 
view of  the  Constitution.  It  follows,  therefore,  that  a  more 
reliable  criterion  than  the  foregoing  statement  will  be  obtained  by 
considering  the  estimated  amount  of  new  debt  (not  merely  funded 
debt,  but  all  constitutional  "indebtedness")  incurred  during  each 
of  the  past  five  years  (excluding  debt  for  water  purposes  incurred 
since  January  i,  1904),  as  shown  in  part  by  the  communication  of 
the  Comptroller  to  the  Board  of  Estimate  and  Apportionment, 
dated  December  6,  1904,  which  appears  to  be  as  follows:* 

1902 $32,364,980  05 

1903 52,792,139  75 

^904 49,339,924  95 

1905 62,920,260  63 

1906 69,172,912  99 

Total $266,590,218  37 

Average $53,318,043  67 


I 


I! 


10 

The  bond  issues  of  the  immediate  future  cannot  be  regarded 
as  wholly  subject  to  the  discretionary  control  of  the  Board  of 
Estimate  and  Apportionment.    The  welfare  of  the  City  impera- 
tively demands  that  certain  classes  of  improvements  shall  within 
certain  limits  be  carried  on — among  which  may  be  mentioned  the 
acquisition  of  new  school  sites  and  the  erection  of  new  school 
houses ;  opening,  paving  and  repaving  streets ;  constructing  sew- 
ers, etc.    For  other  purposes,  such  as  parks  and  public  buildings, 
a  determination  to  economize  might  succeed  in  materially  cur- 
tailing the  extent  of  future  bond  issues,  and  in  view  of  the  present 
difficulty  of  selling  City  bonds,  it  is  fairly  a  subject  for  considera- 
tion whether  a  certain  retrenchment  in  municipal  expenditure  in 
line  with  the  proposed  economies  of  general  corporate  manage- 
ment throughout  the  country  resulting  from  the  present  strain  on 
credits  and  borrowings,  will  not  soon  enforce  itself  as  a  result  of 
natural  financial  laws.    In  dealing  with  such  uncertain  factors  as 
these,  it  may  be  said  that  one  man's  guess  is  as  good  as  another's. 
But  we  know  of  no  better  starting  point  in  dealing  with  this  sub- 
ject than  to  treat  future  developments  as  likely  to  proceed  upon 
the  same  lines  as  indicated  by  past  experience.    It  should  be  re- 
membered also  that  the  City  is  already  committed  to  the  carrying 
out  and  completion  of  many  improvements  costing  a  vast  sum  of 
money,  which  could  not  now  be  abandoned  or  unduly  delayed,  no 
matter  how  great  might  be  the  desire  to  retrench.    For  example, 
it  is  not  likely  that  the  expenditures  necessary  to  complete  the  new 
bridges  over  the  East  river  and  the  approaches  necessary  therefor 
will  fall  far  short  of  the  expenditure  already  incurred  for  these 
purposes.     The  City  is  practically  committed  to  a  large  future 
expenditure  for  the  new  Bellevue  Hospital.    The  expensive  site 
and   building    for   the   new    Court   House    on    Union    square, 
which  is  at  least  a  possibility,  may  cost  twenty  millions  or  more. 
Among  other  contemplated  projects  may  be  mentioned  the  Sea 
Side  Park  at  Rockaway,  the  Brooklyn  Bridge  terminal,  a  new 
municipal  building  for  Brooklyn,  the  Riverside  drive  extension 
and  the  Hudson  Memorial  Bridge ;  the  cost  involved  in  removing 
the  New  York  Central  tracks  from  Eleventh  avenue  and  the  very 
large  proposed  expenditures  by  the  Dock  Department,  for  which 
a  requisition  for  the  issue  of  twenty-nine  million  dollars  of  bonds 


II 

has  already  been  made.  When  these  are  considered  in  connection 
with  such  regularly  recurring  annual  expenditures  from  bond 
sales  as  those  required  for  new  school  sites  and  school  houses,, 
opening,  paving,  repaving  and  sewering  streets,  small  parks, 
police  and  fire  sites  and  station  houses  and  other  municipal  build- 
ings, it  will  be  seen  that  unless  a  high  degree  of  conservatism  is 
exercised,  the  indebtedness  which  is  likely  to  be  incurred  in  the 
near  future  will  scarcely  fall  short  of  that  incurred  in  the  last  five 
years,  or  $266,590,218.37.  This  would  amount  to  about  twenty- 
five  million  dollars  more  than  permitted  by  our  estimate  of  the 
debt-incurring  capacity  accruing  to  the  City  within  that  period — 
it  being  borne  in  mind,  however,  that  this  estimate  of  future  in- 
debtedness allows  for  a  liability  for  rapid  traCtisit  purposes  equal 
to  that  incurred  during  the  past  five  years. 

If  for  the  sake  of  argument  the  annual  increase  of  assessed 
valuations  of  real  estate  be  assumed  to  be  three  hundred  and  fifty 
millions,  instead  of  three  hundred  millions,  for  each  of  the  next 
five  years,  the  result  would  be  a  theoretical  ability  to  carry  out 
such  a  programme  of  public  improvements  by  entirely  exhausting 
the  debt  margin ;  if  the  annual  increase  be  assumed  to  be 
$400,000,000,  there  would  be  a  surplus  of  $25,000,000,  and  on  the 
basis  of  an  annual  increase  of  $500,000,000  there  would  be  a  sur- 
plus of  $75,000,000. 

« 

To  review  the  situation,  therefore,  it  would  seem  that  one  of 
three  alternatives  must  be  accepted:  Either  (i)  the  City  must 
enter  into  a  period  of  enforced  economy  in  the  way  of  capital  ex- 
penditure, reaching  even  so  far  as  the  complete  abandonment  of 
such  public  improvements  as  are  not  to  be  regarded  as  absolutely 
essential ;  and  a  severe  retrenchment  in  regard  to  even  such  im- 
portant needs  as  school  houses  and  street  improvements;  or  (2) 
assessed  valuations  must  be  forced  upwards  to  a  degree  which 
your  Commission  can  but  regard  as  unnatural  and  likely  to  result 
in  hardship  and  injustice;  or  (3)  provision  should  be  made  for  an 
amendment  to  the  Constitution  increasing  the  City's  power  to 
incur  debt. 

Your  Commission  has  approached  this  last  alternative  with 
great  reluctance.    We  are  fully  aware  of  the  enormous  increase 


I 


*l 


12 

9 

which  has  taken  place  in  the  last  ten  years  in  the  City's  funded 
debt,  and  we  do  not  seek  to  minimize  the  ever  increasing  cost  at 
which  the  City  has  utilized  its  credit — a  cost  which  has  increased 
sixty  per  cent,  in  less  than  twenty  years — i.  e.,  from  the  two  and 
one-half  per  cent,  bonds  sold  above  par  in  1889,  to  the  four  per 
cent,  bonds  of  to-day,  which  are  barely  salable  at  the  same  price. 

But  on  principle,  and  looking  solely  to  the  reasons  which  led 
to  the  insertion  in  our  State  "Constitution  (as  well  as  in  those  of 
many  other  States)  of  the  provision  limiting  municipal  indebted- 
ness, we  can  find  no  objection  to  such  an  amendment  as  we  intend 
to  suggest. 

The  chief  purpose  of  this  constitutional  provision  is  to  prevent 
cities  from  imposing  too  great  a  burden  of  debt  uf)on  their  tax- 
payers, present  and  future.  What  constitutes  the  burden  of  debt  ? 
Solely  the  interest  charge,  and  in  the  case  of  anticipated  debt 
liquidation,  a  certain  small  additional  charge  for  amortization. 
Now,  if  a  public  improvement  be  self-supporting  or  profitable, 
there  is  no  burden  upon  the  taxpayers,  and  the  necessity  for 
this  constitutional  restriction  falls.  The  danger  to  be  avoided,  in 
the  judgment  of  your  Commission,  is  the  possibility  of  a  public 
work,  in  its  inception  profitable,  becoming  subsequently  unprofit- 
able— and  this  not  so  much  by  natural  causes  as  by  legislation 
enacted  in  deference  to  a  supposed  public  demand. 

Take,  for  example,  the  existence  of  a  subway  municipally 
owned  and  operated — something  which  might  be  a  realizable  fact 
under  such  an  amendment  to  the  Constitution.  Such  a  project 
might  be  operated  profitably  by  the  City  on  the  basis  of  a  five- 
cent  fare ;  but  if,  in  deference  to  public  agitation,  the  Legislature 
should  require  the  City  to  operate  such  a  road  on  a  three-cent  fare 
or  a  two-cent  fare,  or  for  no  fare  at  all,  the  ''burden  of  debt" 
would  instantly  reassert  itself  and  with  crushing  force. 

While  favoring  the  principle  of  the  exemption  of  debts  in- 
curred for  self-sustaining  public  enterprises,  we  emphatically  con- 
demn any  further  measure  of  relief  from  the  salutary  safeguards 
of  the  Constitution,  which  does  not  carry  with  it  an  equivalent 
protection  for  the  taxpayers.    No  further  progress  along  the  lines 


13 

of  the  constitutional  amendment  of  1905  seems  either  desirable  or 
safe. 

Your  Commission,  therefore,  has  deemed  it  the  part  of  wisdom 
to  prepare  a  conservative  plan  for  a  proposed  constitutional 
amendment  which,  while  exempting  from  the  terms  of  the  consti- 
tutional limitation  bonds  issued  for  self-supporting  enterprises, 
would  at  the  same  time  provide  a  nearly  automatic  scheme  by 
which,  should  such  an  enterprise  ever  become  non-supporting,  the 
bonds  issued  to  defray  its  cost  would  immediately  be  counted  in 
estimating  the  City's  indebtedness. 

The  expression  of  this  idea  in  a  form  suitable  for  incorporation 
in  the  Constitution  has  proved  to  be  a  matter  of  some  difficulty. 
In  our  opinion  it  is  necessary  that  some  tribunal  should  be  named 
which  should  determine  periodically  what  debts  incurred  by  the 
City  should  not  in  a  given  time  be  included  in  determining  the 
City's  indebtedness,  because  of  the  fact  that  the  undertakings  for 
which  they  were  incurred  were  self-supporting. 

We  believe  that  the  Appellate  Division  of  the  Supreme  Court 
is  the  proper  tribunal,  because  that  body  has  satisfactorily  dis- 
charged a  similar  function  in  regard  to  the  determination  of  trans- 
portation routes  imposed  upon  it  by  the  State  Constitution. 

It  will  be  noticed  that  care  has  been  taken  in  framing  the  pro- 
posed amendment,  to  give  all  persons  interested,  including  the  rep- 
resentatives of  both  the  City  and  the  State  and  the  public  gener- 
ally, the  right  to  appear  before  the  Appellate  Division  and  oppose 
or  support  any  proposition  for  the  exclusion  of  bonds  in  the  ascer- 
tainment of  the  City's  debt-incurring  power.  This  suggestion  has 
been  made  for  two  reasons:  First,  to  insure  publicity;  secondly, 
in  the  hope  that  because  of  the  enlightening  discussion  incident  to 
the  public  hearings  the  Appellate  Division  would  in  the  course  of 
time  work  out  a  consistent  theory  as  to  net  revenue  above 
expenses  much  more  satisfactory  than  any  that  could  be  outlined 
in  advance,  which  was  based  more  or  less  on  a  priori  grounds. 

In  conclusion  we  find  that  the  adoption  of  this  amendment  and 
its  application  by  the  courts  would  add  to  the  margin  of  per- 
missible indebtedness  about  one  hundred  and  forty  million  dollars. 


14 

representing  the  exclusion  of  bonds  outstanding  for  the  following 
purposes  and  in  the  following  amounts: 

For  subways $45,000,000  00 

For  docks 56,000,000  00 

For  water  purposes  prior  to  1904 39,000,000  00 

Total $140,000,000  00 


Following  is  the  constitutional  amendment  proposed : 
Amend  section  10  of  article  8  of  the  Constitution  of  the  State 
of  New  York  as  the  same  was  amended  by  popular  vote  in  No- 
vember, 1905,  by  inserting  after  the  words: 

"except  that  debts  incurred  by  the  city  of  New  York  after 
the  first  day  of  January,  nineteen  hundred  and  four,  to  pro- 
vide for  the  supply  of  water,  shall  not  be  so  included," 

the  words  following: 

"and  except  further  that  debts  heretofore  or  hereafter 
incurred  by  the  said  city  for  the  acquisition  of  property  or 
for  the  construction  of  railroads,  docks  or  other  improve- 
ments which  shall  be  owned  by  the  said  city,  shall  not  be 
so  included  if  it  shall  appear  by  the  ascertainment  and  de- 
termination hereinafter  provided  that  the  said  city  is  receiv- 
ing current  net  income  from  such  property  or  improvement 
in  excess  of  the  interest  payable  by  the  said  city 
upon  the  total  debt  incurred  for  the  acquisition  of 
such  property  or  the  making  of  such  improvement.  The 
appellate  division  of  the  supreme  court  in  the  first  de- 
partment shall,  from  time  to  time,  upon  the  application  of 
the  board  of  estimate  and  apportionment  or  other  chief 
financial  board  of  the  said  city,  ascertain  and  by  order  de- 
termine the  existing  debt  or  debts  incurred  by  it  for  such 
acquisition  of  property  or  the  making  of  such  improve- 
ment and  which  shall  not  be  so  included,  provided  that 
such  ascertainment  and  determination  shall  be  upon  notice 
to  the  governor  and  attorney  general  of  the  state  and  to  the 
mayor  of  the  said  city  and  upon  other  reasonable  public 
notice  to  be  prescribed  by  the  court,  and  that  the  attorney 
general,  either  upon  his  own  motion  or  upon  the  direction 
of  the  governor,  and  the  mayor  of  the  said  city,  and  any 
resident  of  the  said  city  who  shall  be  the  owner  of  real  es- 
tate therein,  duly  assessed  for  taxation,  shall  be  entitled  to 


15 


appear  and  to  be  heard  in  the  proceeding  for  such  ascer- 
tainment and  determination,  and  provided  further  that  any 
such  ascertainment  and  determination  shall  be  valid  and 
effectual  only  for  such  period  as  shall  be  prescribed  therein 
not  exceeding  five  years  from  and  after  the  making  thereof, 
but  shall  not  prevent  the  making  of  any  new  ascertainment 
and  determination  whether  during  or  after  such  period." 
Attention  is  called  to  the  fact  that,  owing  to  the  constitutional 
provision   requiring  amendments  to  be  approved  by  two   suc- 
cessive legislatures  not  having  the  same  senate,  before  being  sub- 
mitted to  vote  of  the  people,  the  earliest  date  at  which  this  pro- 
posed amendment  could  be  made  effective  would  be  19 10. 
Dated  April  2,  1907. 

Respectfully  submitted, 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


REPORT 

ON 

THE  SYSTEM  OF  ACCOUNTS  AND  STATISTICS  OF 
THE  CITY  OF  NEW  YORK. 


^^A^«L,  1907. 


I 


new  YOKK  s 

C.  O.  mJRQOYNE,  WALKEK  ANO  OeiiTlfB  STS. 

1907. 


'  i_  . ,.. 


■ 


ADVISORY    COMMISSION 


ON 


Taxation  and  Finance. 


Chair  man  y 
EDGAR  J.  LEVEY. 

Committee  on  Taxation  and  Revenue^ 

Lawson  Purdy,  Francis  Lynde  Stetson, 

Edwin  R.  A.  Seligman,  Morris  K.  Jesup, 

Joseph  Haag. 

Com^mittee  on  the  City  Debt  and  Special  Assessments, 
Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  John  J.  Delany, 

Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics, 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


yii 


REPORT  ON  THE   SYSTEM   OF  ACCOUNTS  AND 
STATISTICS  OF   THE  CITY  OF  NEW  YORK. 


Hon.  George  B.  McClellan,  Mayor  : 

Sib. — Accepting  as  a  principle,  that  the  purpose  of  accounts 
and  statistics  is  to  obtain  an  intelligent  basis  for  control  over  the 
business  of  the  City,  it  follows  that  the  nature  of  its  accounts 
and  statistics  should  be  such  as  will  make  this  control  effective. 
Under  the  Charter  of  New  York  there  are  essentially  two  forms 
of  control  to  be  exercised,  viz :  (1)  Financial,  and  (2)  Execu- 
tive or  Operative. 

For  the  purpose  of  exercising  financial  control  the  corporate 
machinery  provided  consists  of  (1)  an  office  or  division,  under 
the  direction  of  the  Comptroller,  for  the  exercise  of  accounting 
control,  and  for  the  issue  of  corporate  bonds;  (2)  The  City 
Treasury,  the  chief  officer  of  which  is  the  City  Chamberlain ; 
(3)  Commissioners  for  the  Selection  and  Approval  of  Deposi- 
tories of  the  funds  of  the  City  ;  (4)  Commissioners  of  the  Sink- 
ing Funds  ;  (5)  the  Board  of  Estimate  and  Apportionment. 
To  the  end  of  providing  the  Finance  Department  with  the  in- 
formation necessary  to  financial  control,  there  has  also  been 
installed  in  the  City  a  thorough  system  of  appropriation  and 
fund  accounts  which  are  under  the  direction  of  its  official  head 
— the  Comptroller. 

With  devices  for  exercising  executive  or  operative  control 
over  its  affairs,  the  City  is  not  so  well  provided.  The  con- 
trolling accounts  of  the  Department  of  Finance,  as  well  as  its 
departmental  accounts,  belong  essentially  to  the  first  category. 
There  has  been  in  the  City  a  general  lack  of  accounting  devices 
for  obtaining  accurate  information  by  means  of  which  the 
properties  and  liabilities  and  the  income  and  expenses  of  the 
City  may  be  intelligently  administered.      To  this  time,  but 


little  attention  has  been  given  to  municipal  cost  keeping'and  to 
the  financial  and  operative  aspects  of  property  administration. 

Defects  in  the  Present  System  of  Accounts  and  Statistics. 

More  concretely  the  defects  in  the  present  system  of 
accounts  and  statistics  of  the  City  of  New  York  may  be 
stated  as  follows  : 

1.  Although  the   City  is   the   owner  of   many   tracts   and 
parcels  of  real  estate  no  adequate  record    has  been  kept  of 
this  property  ;  at  the  time  that  our  committee  made  its  exami- 
nation  the  City  did  not  have  a  complete  record  as  to  the  loca- 
tion  description,  character  of  title,  cost,  or  present  condition 
of  the  real  estate  owned  by  the  Corporation  ;  there  was  not  even 
a  system  of  maps  or  charts  which  completely  showed  the  loca- 
tion of  such  properties.     Without  a  complete  account  of  real 
estate  there  is  no  assurance  to  be  given  and  only  incomplete  in- 
formation to  be  had  as  to  whether  it  is  paying  the   taxes   and 
assessments,  which  it  should  pay  on  its  own  properties.     This 
also  gives  opportunity  for  those  in    subordinate    admiuistrative 
relation  through  secret  contracts  and  other  methods,  to  utilize 
city  properties  for  political  favors  and  for   private  income,  as 
well    as   holds   oat   an   inducement  to  emploves  to  continue 
other  practices  which  if  known  would  be  publidy   condemned. 
I.  Ihere  being  no  complete  system  of  controlling  accounts 
over  assets,  resources  of  the  City  in  the  form  of  revenues  re- 
ceivable were  carried  on   collateral   or  memorandum  records. 
Ihere  had  not  been  an  accounting  for  the  arrears  of  taxes  and 
assessments  which  constituted  assets  of  the  various  munici- 
palities consolidated  with  the  City  of  New  York  in  the  year 
1898.    It  thus  appears  that  not  only  was  a  considerable  amount 
of   he  revenues  of  the  city  in  danger  of  being  lost  through  neg- 
lect   but  there  was  also  a  constant  temptation  placed  in  the 
hands  of  clerks  to  deal  with  those  who  were  obligated  to  the 
City  for  the  payment  of  assessments  and  arrears. 

3.  The  same  was  true  of  assets  in  the  form  of  stocks  of 
material  on  hand  and  personal  property  with  which  the  officers 
and  the  agents  of  the  City  were  chargeable.  lu  the  several 
departments  examined,  the  records  of  store  or  stock  yard  en- 
tries were  not  under  direct  accounting  control ;  these  records 
therefore  might  be  arbitrarily  brought  into  adjustment  at  peri- 


6 

ods  of  inventory  taking,  or  might  not  be  adjusted  at  all,  with- 
out the  fact  being  discovered  except  after  a  long  and  expensive 
examination  and  report. 

4.  The  system  of  controlling  accounts  not  being  complete 
over  current  and  contingent  liabilities,  many  of  the  records 
showing  the  indebtedness  of  the  City  were  essentially  in  the 
nature  of  memorandum  accounts.  Without  an  adequate  sys- 
tem of  central  control  over  such  records,  the  completeness 
and  accuracy  of  accounts  of  indebtedness  may  be  determined 
only  by  occasional  and  collateral  investigation.  These  books 
or  collateral  records,  in  many  instances,  have  no  direct  rela- 
tion to  the  general  or  detailed  appropriation  accounts  under 
the  control  of  the  Department  of  Finance.  As  a  result  of  this 
lack  of  records,  both  the  city  and  those  contracting  with  it, 
are  at  the  mercy  of  uncontrolled  subordinates  in  the  Civil 
Service ;  bills  presented  to  the  several  departments  for  ap- 
proval after  the  delivery  of  goods  maybe  withheld  for  months, 
while  others,  for  consideration,  may  be  forwarded  out  of  their 
regular  turn.  Without  collusion  or  even  knowledge  on  his 
part,  the  Comptroller  may  be  placed  in  the  attitude  of  con- 
tributing to  a  wholesale  levy  of  tribute  on  those  who  have 
business  relations  with  the  City. 

5.  The  Department  of  Finance  had  no  regular  controlling 
accounting  device  for  determining  the  accuracy  of  other  de- 
partmental records  showing  revenues  accrued  to  the  City, 
whether  these  revenues  be  in  the  form  of  licenses,  rates,  fees, 
rentals  of  properties,  or  other  income  applicable  to  the  ex- 
penses of  a  particular  period.  Generally  speaking,  the  depart- 
mental records  of  revenues  accrued  were  carried  as  collateral 
memoranda  and  not  as  an  essential  detail  of  general  accounts. 
As  a  result  uncollected  water  rates,  rentals,  etc.,  might  go  for 
years  uncollected,  or  if  collected,  the  amounts  received  by 
the  officers  or  agents  of  the  City  might  not  be  brought 
to  the  attention  of  the  Comptroller  through  trial  balances 
regularly  taken  oflf  from  subsidiary  books  and  as  supporting 
details  to  the  general  records  kept  by  the  Comptroller. 

G.  The  same  was  true  of  expenses  incurred  by  the  several 
offices  and  departments,  the  essential  accounts  under  control 
being  those  of  appropriation  and  funds.  Depaitmeutul 
expense  and  books  of  records  showing  departmental  cost, 
which  were  kept  for  the  information  of  those  in  positions  ol 


H^ 


I  r 


< 


administrative  responsibility,  were  not  regularly  proved  to  the 
books  of  the  Comptroller.  Even  in  the  Departments  them- 
selves, control  over  the  accuracy  of  expense  and  of  stock 
records,  where  such  record  is  kept,  was  incomplete. 

7.  There  being  no  regular  controlling  accounting  method 
of  obtaining  accurate  data  with  respect  to  income  and  expenses, 
little  eflFort  was  made  to  co-ordinate  income  and  expenses 
within  the  Water  Department  and  the  Department  of  Docks 
and  Ferries,  which  are  presumably  operated  on  a  commercial 
basis,  and  there  was  no  regular  accounting  device  for  bringing 
the  general  revenues  of  the  City  for  a  particular  year  into 
comparison  with  expenses  of  the  same  period,  the  com- 
parative results  available  being  those  of  cash  received  aud 
cash  disbursed.  The  Mayor  and  other  administrative 
officers,  when  desiring  information  with  respect  to  the 
cost  of  any  particular  branch  of  municipal  activity,  are 
able  to  obtain  this  information  only  after  a  special  examina- 
tion has  been  made,  the  accuracy  of  the  results  of  which 
may  not  be  readily  proved — an  examination  entailing 
delay  that  often  defeats  the  very  purpose  of  the  inquiry. 
Moreover,  the  time  of  the  staffs  of  the  commissioners  of  ac- 
counts, and  of  the  Bureau  of  Statistics  of  the  Comptroller's 
office  is  largely  occupied  with  special  examinations  to  obtain 
information  that  should  come  currently  and  regularly  through 
departmental  accounts  and  reports,  thus  diverting  the  energies 
of  two  branches  of  the  municipal  service  away  from  the  work 
on  which  they  would  be  more  efifectively  employed  in  aid  of 
the  administration  of  the  city's  affairs. 

8.  The  lack  of  controlling  accounts  over  expenses  of  depart- 
ments has  caused  the  City  to  operate  on  a  false  basis.  Many 
millions  -  of  dollars  of  the  proceeds  of  bond  issues  have  been 
used  to  meet  the  current  expenses  of  the  City  which  should 
have  been  included  and  covered  into  the  atmual  tax  levies  for 
meeting  cuiTent  expenses,  and  many  millions  of  dollars  of  tiie 
bonded  debt  of  the  City  are  represented  by  such  expenditures 
for  which  no  property  or  thing  of  value  remains  the  proceeds 
having  been  used  for  current  salaries  and  wages  and  for  cur- 
rent supplies  which  have  disappeared,  without  this  fact  com- 
ing to  public  attention.  It  is  only  fair  to  state,  however,  that 
this  unfortunate  result  is  in  part  due  to  specific  statutory 
enactment. 


9.  There  being  no  method  of  controlled  cost  keeping, 
independent  of  appropriation  accounts  (certain  large  items 
of  departmental  expenses  not  being  charged  against  depart- 
ment appropriations)  the  City  may  not  even  closely  ap- 
proximate the  cost  of  operating  its  several  branches  or  divi- 
sions of  service.  For  example,  the  cost  of  printing  and 
st.itionery,  the  cost  of  certain  items  of  Furniture  and  Fixtures, 
the  cost  of  heat,  light  and  power,  the  cost  to  the  City  for  office 
space  used  by  a  department  when  occupying  buildings  belong- 
ing to  the  City,  etc.,  etc.,  have  not  appeared  as  a  part  of  the 
departmental  budget  receiving  supplies  or  the  benefit  of  such 
use,  for  the  reason  that  these  supplies  or 'costs  have  been  met 
by  independent  appropriations  made  to  cover  them. 

10.  By  reason  of  the  City  having  no  regularly  controlled 
accounting  method  of  obtaining  departmental  expenses  and  by 
reason  of  the  practice  of  making  independent  appropriations 
for  such  items  of  expenditures  as  above  indicated,  central  ad- 
ministrative and  accounting  control  over  such  branches  of  the 
service  as  the  City  Record  and  the  Borough  Presidents  offices 
has  been  largely  lost.  The  cost  of  printing  and  stationery 
being  charged  against  appropriations  to  the  City  Record,  the 
cost  of  such  items  as  furniture  and  heat  and  light  being 
charged  against  other  appropriations  not  included  in  the 
departmental  budgets  where  such  supplies  are  used,  not  only 
do  the  departmental  estimates  give  a  false  report  of  expenses 
bnt  the  accounting  officers  have  no  regular  means  of  checking 
the  accuracy  of  the  accounts  of  divisions  furnishing  these  sup- 
plies. That  is,  since  the  accounts  and  reports  from  depart- 
ments using  the  materials  and  supplies  furnished  may  not  be 
used  as  a  check  on  the  stock  accounts  from  which  the 
materials  were  sent,  regular  administrative  control  over 
such  branches  of  the  municipal  service  as  the  City  Record 
and  Borough  Presidents  offices  are  to  a  large  extent 
impaired,  a  special  and  comprehensive  exatnination  being 
necessary  to  acquire  the  information  needed  as  a  basis  for 
executive  or  other  controlling  judgment. 

11.  By  a  system  of  aceonnting,  such  as  th;»t  employed  by 
the  City  of  New  York,  which  charges  against  department 
appropriations  the  goods  and  supplies  directly  when  pur- 
chased, administrative  aud  accounting  control  is  lost  or  is  in  a 
large  measure  impaired  when  such  goods  or  material  are  first 


Cj.in 


8 


9 


carried  into  stock.  For  example,  in  the  Department  of  Belle- 
vue  and  Allied  Hospitals,  in  the  Health  Department,  and  in  a 
number  of  other  departments,  most  of  the  supplies  purchased 
go  directly  to  storerooms,  little  information  being  obtainable 
from  the  invoice  itself  as  to  where  the  supplies  will  be  used. 
In  Bellevue  these  are  first  delivered  to  a  general  store,  then, 
on  requisition,  they  are  sent  to  the  stores  of  the  several  hos- 
pitals included  in  the  Department,  from  which  in  turn  they 
are  sent  to  the  several  wards  or  messes  or  to  other  branches 
of  the  services  where  they  are  finally  consumed.  The  lack 
of  an  accurate  cost  accounting,  in  many  instances,  opens 
the  way  to  the  diversion  of  supplies  to  private  uses  without 
discovery.  Another  result  of  this  defect  in  records  and  reports 
is  that  those  in  positions  of  central  control  have  no  regular 
accounting  method  to  accurately  determine  whether  contractors 
are  fairly  dealing  with  the  city  through  the  several  depart- 
ments. 

12.  The  necessity  for  detailed  information  with  respect  to 
expenses,  distinct  from  charges  against  appropriations,  as  a 
guide  to  administration  in  the  departments,  has  given  rise  to 
the  development  of  a  large  number  of  uncontrolled  statistical 
records  which  are  designed  to  lend  themselves  to  departmental 
uses.  In  each  of  the  departments  concerning  which  definite 
investigation  was  made,  the  volume  of  work  cairied  on  is  as 
great,  in  some  instances  far  greater,  than  would  be  necessary 
to  keep  a  complete  system  of  controlled  records  of  income  and 
expenses  with  collateral  operative  statistics  in  any  detail  that 
might  be  desired.  The  effect  of  the  lack  of  such  controlled 
accounts  and  of  the  exercise  of  control  over  those  departmental 
records  is  that  all  of  the  income  and  expense  and  stock  records 
of  the  department  are  in  the  nature  of  uncontrolled  statistical 
data.  These  statistical  data  not  only  suffer  from  inaccuracy, 
but  have  no  basis  or  method  of  co-ordination  such  as  would  be 
provided  if  the  administrative  financial  data  required  were 
made  a  pait  of  the  system  of  controlled  accounts  from  the  de- 
tails of  which  regular  trial  balances  would  be  made  as  a  neces- 
sary means  of  supporting  a  general  record  or  account. 

13.  Another  serious  defect  in  the  present  system  is  that  the 
income  and  expenses  could  not  be  regularly  audited  except  at 
an  expense  far  greater  than  should  be  incurred  in  proving  the 
accuracy  of  departmental  records.     As  a  result,  departmental 


records  are  not  at  the  present  time  regularly  audited ;  in  fact, 
the  records  of  some  of  the  departments  have  not  been  audited 
for  years.  To  properly  audit  the  departmental  books  of 
the  City  of  New  York  as  at  present  kept  would  make 
necessary  the  employment  of  a  much  larger  staff  than 
is  at  present  engaged  in  the  office'  of  Commissioner  of  Ac- 
counts and  in  the  office  of  Comptroller  even  though  these 
offices  were  not  encumbered  with  unnecessary  work.  With  a 
system  of  complete  accounting  control  over  departmental 
accounts  of  income  and  expenses,  as  well  as  appropriations,  it 
may  be  said  that  assuming  an  efficiency  equal  to  that  obtain- 
able in  private  business  the  number  of  examiners  of  accounts 
now  employed  in  the  office  of  Commissioner  of  Accounts 
•would  be  adequate.  Private  corporations  doing  a  business 
involving  as  many  transactions  as  does  the  business  of  the 
City  of  New  York  and  having  departments  much  more  diversi- 
fied, with  branches  and  activities  scattered  over  a  Continent, 
some  of  which  even  have  international  business  relations  and 
departments,  maintain  not  only  complete  and  regular  audits  of 
each  office  and  branch  from  one  to  three  times  a  year,  but  also, 
in  addition,  avail  themselves  of  annual  indepjndent  audits  by 
public  accountants  at  a  cost  far  less  than  is  at  present  incurred 
by  the  Municipality.  On  the  other  hand  private  corporations 
and  municipalities  having  a  much  smaller  volume  of  business 
when  not  under  a  centralized  accounting  control,  over  income 
and  expenses  as  well  as  properties  and  liabilities,  have  found 
it  impossible  to  make  regular  audits  except  at  enormous  ex- 
pense ;  in  such  instances  either  no  adequate  audit  has  been 
made  or  the  cost  of  examination  has  been  so  large  as  to  com- 
pel the  companies  and  municipalities  making  them  to  intro- 
duce a  system  of  accounting  control  over  departments  and 
branch  offices.  It  is  a  matter  of  multiplied  experience  that 
central  control  over  income  and  expenses,  as  well  as  over 
funds  aud  other  proprietary  accauuts,  is  not  only  essential 
to  careful  management,  but  necessary  to  bring  the  cost  of 
audit  aud  inspection  within  reasonable  limits  ;  and  further, 
that  corporations,  both  public  aud  private,  cannot  afford  to  be 
without  such  control. 


10 


Constructive  Suggestions  as  to  Methods  of  Accounting. 


The  accounting  requirements  of  a  municipality  differ  from 
tlioae  of  an  ordinary  business  corporation  principally  in  this- 
— that  in  addition  to  the  information  concerning  Income  an'd 
Expenses  and  Assets  and  Liabilities  required  for  intelligent 
management,  the  City  obtains  control  over  its  finances  through 
a  budget.  Appropriation  accounts  are  therefore  n(}cessary  as 
a  means  of  knowing  the  anount  of  funds  available  for  the  vari- 
ous purposes  or  for  the  various  offices  and  Departments  to 
which  authority  has  been  given  to  spend.  In  tiie  past,  it  has 
been  for  this  latter  purpose  only  that  the  general  controlling 
accounts  of  the  City  have  been  kept  by  the  Department  of 
Finance— income  and  expense,  current  asset  and  liability  and 
property  accounts  having  been  deemed  unessential  or  only  an 
incident  or  as  memoranda  to  the  appropriation  and  Fund  ac- 
counts. As  a  means  of  meeting  the  demands  of  the  Executive, 
and  of  the  people,  for  accurate  information — as  a  means 
of  enabling  Department  Heads  to  obtain  the  data 
necessary  for  economic  and  efficient  administration 
and  to  the  protection  of  municipal  properties  and 
the  good  faith  of  employees,  the  system  of  direct 
accounting  control  over  the  affairs  of  the  City  should  be 
extended  in  such  manner  as  to  include  Departmental  records. 
This  may  be  done  by  installing  a  uniform  system  of  depart- 
mental accounting  and  by  the  installing  in  the  office  of  Comp- 
troller a  system  of  controlling  accounts  over  departmental 
income  and  expenses  and  over  current  as  well  as  the  capital 
assets  and  liabilities  of  the  City.  The  detailed  income  and  ex- 
pense accounts  (kept  in  tlie  several  departments  subject  to 
this  general  control)  would  enable  them  not  only  to  report  the 
general  operative  results  but  also  regularly  to  lay  before  de- 
partmental and  operative  heads  statements  of  income  and  ex- 
penses in  such  detail  as  is  required.  The  following  form  of 
Summary  or  General  Report  of  the  Water  Systems  is  suggested 
not  as  a  final  draft  of  recommendation  but  rather  to  iudi<;ate 
the  general  financial  and  operative  relations  which  should  be 
reported  from  the  departmental  income  and  expense  accounts 
and  the  general  character  of  physical  and  operative  statistics 
necessary  to  administrative  direction  and  control : 


11 


GENERAL  SUMMARY  OF  INCOME  AND  EXPENSES  OF  THE  WATER 
SYSTEMS  OF  THE  CITY  OF  NEW  YORK  FOR  THE  MONTH 
ENDED  190    . 


• 

Total  for 
the  month 

Total  for 
months  of 
of  the  cur- 
rent year 

Total  for 
months 
of  the 

past  year 

Increases 
decreases 

Inoomb 

I.  Water  Rates: 

(a)  Regular , 

(b)  Meter 

1 

Total  Water  Rates 



II.  Permits: 

(a)  Land 

- 

(b)  Marine 

Total  Permits 

III.  Miscellaneous 

Total  Miscellaneous 

Total  of  all  Income  from 
Water.... 

Expenses 

I.  Administration : 

(a)  General 

(b)  Boroueh 

Total  Admiuistratiou 

IL  Collection  &  Storage : 

(a)  Operation     and    Main- 
tenance  

1.  Watersheds 

2.  Acqueducts  and 

Reservoirs 

3.  Pumping    sta- 

tions   

4.  Other 

Total  Collection  and  Stor- 
age   

III.  Distribution  : 

(a)  Operation 

1.  Revenue     Collec- 
tion.  

2.  Patrol  and  Inspec- 
tion  

(6)  Maintenance  ..  

1.  Pipe  iards  

2.  District      Repairs 

and      Replace- 
ments   

Total  Distribution 

1 

12 


13 


j  Total  for 
ithe  month 


Total  for 
months  of 
the  cur- 
rent year 


IV. 


General  Property  Expenses,: 
Etc.  :  i 

(a)  Taxes j 

(6)  Insurance j 

(c)  Interest  on  Bonds j 

(d)  Depreciation  j 

Of  Production  and 

Storage  Plants... 

Of    Distributing 

Plants 


1. 


Total  for 
months 
of  the 

past  year 


Total    General     Property 
Expenses,  Etc 

Total  of  all  Expenses  for 
Water 


Increases 

or 
decreases 


Excess  of  Income  over  Expenses 
Excess  of  Expenses  over  Income 

Cash  Receipts : 

1,  Collections    on    account  of 

Previous  Period 

(a)  Water  Rates : 

(1)  Regular  .... 

(2)  Meter 

(3)    

(ft)  Permits : 

(1)  Land 

(2)  Marine 

(c)  Miscellaneous 

2.  Collections  on  Account  of 

Current  Period 

(rt)  Water  Rates 

(1)  Regular... 

(2)  Meter 

(3)  

(ft)  Permits  : 

(1)  Land 

(2)  Marine 


(c)  Miscellaneous. 


Total  Cash  Collections. 


Excess  of  Cash  Collections  over 
Income  Accrued 

Excess  of  Income  Accrued  over 
Cash  Collections 


Total  for 

Total  for 
months  of 

Total  for 
months 

Increases 

• 

the  month 

the  cur- 
rent year 

of  the 
past  year 

decreases 

Uncollected    Accounts    Receiv- 

able: 

1.  At  Beginning  of  Period 

(a)  More  than  1  month 

and    less    than    3 

overdue 

(ft)  More  than  3  months 

- 

and    less    than    1 

year  overdue 

2.  Accrued  during  Period..  .. 

Total 

3.  Collected  during  Period  .... 

4.  Balance  at  end  of  Period.... 

Liability  for  Accounts  Paid  in 

Advance 

Excess    of    Accounts    Received 

over   Liability    for    Accounts 

Paid  in  Advance 

2. 


Cost  of  Plants : 

1.  Cost  of  Plants  less  Depre- 
ciation and  Losses  at  be- 
ginning of  Period. 

Cost  of  Construction  during 

Period 

(a)  Supervision  and  In 
spection 

(1)  Of  Extensions 

(2)  Of  Higli  Pressure 
svstems 

(ft)  Outlays   for    Plants 

during  Period 

(1)  For  Extensions.. 
(1)  For  High    Press- 
ure   

Depreciation     and    Losses 

during  Period 

Cost  of  Plants  Less  Depre 
elation  at  the  end  of  the 
Period 


4. 


Operative  Statistics  : 

Number  Gallons  Received  in 

City  Reservoirs 

Number    Gallons    Discharged 

from  City  Reservoirs.  

Wastage  at  Reservoirs  (Gal.) 

K  .i  w  (Per 

ct.) 


r 


lit 


14 


15 


Number  Gallons  delivered  : 

Regular  Service 

Meter  Service 

Wastage  from  Mains,   Pipes, 

(Gal.) 

Wastage    from    M.    P.    (Per 

ct.) 

Cost    of    Production  per    1,000 

Gallons  Produced 

Cost  of  Distribution  per  1,000 

Gallons  Delivered 

Total  Cost    of    1,000   Gallons 

Delivered 

Percentage  of  Total  Cost : 

For  Administration 

For  Distribution 

For    General  Property   Ex- 
penses, Etc 

Average     Meter    Rates     per 

1,000  Gallons 

Average    Regular    Rates    per 

1,000  Gallons 


Total  for 
the  month 


Total  for 
months  of 
the  cur- 
rent year 


Total  for 
months 
of  the 

past  year 


Increases 

or 
decreases 


While  the  Commission  has  gone  to  considerable  length  into 
this  and  other  Departments,  the  exact  details  are  not  for  us  to 
recommend.  These  should  be  worked  out  in  conference  with 
the  Comptroller  and  the  several  parties  in  interest,  after  an  ex- 
haustive study  of  every  phase  of  each  branch  of  activity.  If, 
upon  such  inquiry,  it  should  be  found  that  any  of  the  items 
suggested  should  be  changed  to  better  adapt  a  form  to  admin- 
istration and  accounting  use,  such  alterations  or  changes  may 
be  made  without  impairing  the  principle  of  publicity  sug- 
gested. 

For  the  information  of  the  several  heads  of  the  Water 
Systems,  as  well  as  for  the  information  of  the  Head  of  the  De- 
partment, the  Income  and  Expense,  as  well  as  the  collateral 
physical  and  operative  statistics  of  each  separately  operated 
systems,  should  be  regularly  reported  in  detail  from  the 
accounts  and  subsidiary  records.  Assuming  that  the  detailed 
account,  as  well  as  the  detailed  reports  of  the  several  Bor- 
oughs or  systems  may  have  a  common  classification,  the 
detailed  reports  from  the  Borough  accounting  offices  where  the 
Income  and  Expense  Ledgers  are  kept  may  be  used  as  journal 


entries  for  the  accounts  of  the  central  office  of  the  Department, 
thus  enabling  the  Chief  Bookkeeper  of  the  Departments  to 
render  a  report  in  detail,  for  each  of  the  systems,  or  a  consoli- 
dated report  for  them  all  in  a  form  desired  within  a  few  days 
after  the  closing  of  each  calendar  month.  For  example  :  The 
expenses  of  each  administrative  office  may  be  classified  to  show 
(1)  Salaries  and  Wages;  (2)  Office  Expense  ;  (3)  Miscellaneous 
Administrative  Expenses  with  details  under  each  classification 
something  as  follows  : 

(1)  Salaries  and  Wages 

Commissioner,  Superintendent  or  Head 

Assistants 

Clerks 

Stenographers 


(2)  Office  Expenses 


Rent 

Heat  and  Light 

Printing  and  Stationery 

Postage 

Office  Furniture  and  Fittings 

Telephone,  Telegraph  and  Commercial  Messenger 


(3)  Miscellaneous  Expenses 

Transportation 

Carria<»e  and  Horse  Hire 

Automobile  Expenses 


A  common  classification  mav  also  be  established  for  lab- 
oratories,  pumping  stations,  filtering  plants  and  each  of  the 
operative  divisions  of  the  several  systems,  thus  supplying  for 
each  system  a  common  basis  for  reporting  in  detail  items  of 
expense  and  which  may  finally  be  grouped  and  summarized  in 


16 


17 


a  general  report.  Upon  such  classification,  detailed  expense 
accounts  may  be  established  in  each  of  the  Borough  Offices 
over  which  an  accounting  control  may  be  exercised  by  the 
central  accounting  office  of  the  Department,  and  which  in  turn 
may  be  controlled  from  the  offices  of  Mayor  and  Comptroller. 
By  the  installation  of  properly  classified  expense  accounts  in 
each  of  the  departments,  and  general  expense  accounts  over 
each  of  the  departments  in  the  office  of  Comptroller,  a  complete 
expense  accounting  may  be  made  eflfective  and  information 
will  come  regularly  to  those  in  administrative  relation  neces- 
sary to  judgment  in  the  directiou  and  control  of  the  City's 
business. 

The    Advantages  of    Accocnts  which    Show  Expenses    as 
Distinct  and  Separate  from  Appropriations. 

Objection  has  been  raised  to  the  keeping  of  expense  ac- 
counts as  distinct  from  and  independent  of  appropriation 
accounts.  Those  who  have  criticised  the  introduction  of  this 
class  of  accounts  affirm  that  there  is  no  need  for  distinct  ac- 
counts to  show  expenses.  As  opposed  to  this  view  however, 
it  is  to  be  noted  that  in  a  system  containing  budgetary  ac- 
counts only,  no  place  is  found  for  any  item  of  expense  which 
does  not  represent  a  charge  against  an  appropriation.  In 
such  a  system  no  place  may  be  found  for  such  classes  of  ex- 
penses, as  printing  and  stationery,  heat  and  liglit,  furniture 
and  fixtures  obtained  from  other  departments,  for  an  appor- 
tionment of  salaries  and  wages,  depreciation,  etc.,  etc. 
Printing  and  stationery  being  furnished  to  the  several  depart- 
ments by  the  City  record,  the  purchases  of  stationery  supplies 
must  be  entered  against  appropriations  for  the  support  of  the 
City  record,  and  although  a  register  may  be  kept  which  con- 
tains information  as  to  requisitions  for  printing  and  stationery 
made  by  a  Department,  there  is  no  provision  in  the  controlled 
departmental  accounts  for  exercising  direct  supervision  and 
audit  over  this  class  of  expenses  incurred.  The  same  is  true 
of  office  furniture  and  fittings  which  are  purchased  by  the 
Borough  Presidents  and  of  the  cost  of  providing  the  Depart- 
ment with  office  space,  etc.  Neither  is  there  any  provision 
made  for  the  proper  accounting  for  the  use  of  a  large  part  of  the 
supplies  which  are  purchased  by  the  Departments  themselves 


and  taken  into  stock  before  being  distributed.  These  are 
charged  to  Appropriations  of  the  Department  when  purchased. 
When  operating  on  a  basis  of  appropriation  accounting  only, 
the  fact  that  no  accounting  device  may  be  introduced  which 
will  indicate  the  disposition  of  these  supplies  to  the  various 
branches  of  the  Department  where  used  over  which  control 
may  be  exercised,  suggests  one  of  the  many  reasons  whj-  the 
Department  should  have  expe?ise  account « that  are  independent 
and  distinct  from  appropriatio7i  accounts. 

A  department  of  Municipal  activity  should  have  an  account- 
ing means  of  determining  the  cost  of  operation  as  accurately 
and  as  promptly  as  would  be  if  its  authority  to  spend  did  not 
come  through  appropriations.  The  expense  incurred  bj'  a 
Department  for  supplies  is  not  reflected  by  the  amount  pur- 
chased and  taken  into  stock.  For  example  :  The  Water  De- 
partment of  the  City  of  New  York  might  purchase  many 
thousands  of  dollars  worth  of  pipe,  materials  and  plumbing  sup- 
plies during  any  month  of  the  year,  while  only  a  small  portion 
of  this  stock  may  be  used  during  the  period  reported  on. 
From  an  operative  point  of  view  the  officers  and  the  public 
wish  to  know  what  is  the  relation  of  the  cost  of  operation 
to  the  Income  or  other  provision  made  for  meeting  the  cost 
and  whether  the  several  systems  of  Water  Supply  are  being 
economically  managed.  When  construction  and  repairs  are 
the  objects  of  expenditure,  as  well  as  in  cases  of  the  consumption 
of  consumable  goods,  the  labor  and  materials  actually  used  is 
the  only  basis  for  judgment  as  to  economy.  To  throw  into  the 
expense  accounts  purchases  for  stock,  destroys  all  comparisons 
and  subverts  judgment,  both  with  respect  to  operative  results 
and  with  respect  to  efficiency  and  economy  of  service.  In  de- 
termining questions  of  expense,  account  should  be  taken  of 
the  wear  and  waste  to  the  plant  even  though  no  provision  be 
made  for  repairs  and  replacements.  The  introduction  of  dis- 
tinct accounts  which  will  reflect  expenses  as  8eparate  and 
apart  from  the  provision  made  for  the  payment  of  claims 
against  the  City  on  account  of  purchases,  would  accomplish 
this  result.  Without  such  accounts  this  information  would 
not  be  available. 


I  "t'l 


i 


ill 


18 


19 


illi 


Administrative  Advantage  of   Accounts    and    Eeports  of 
Properties  and  Capital  Outlays. 

Under  a  system  which  makes  provision  for  budgetary 
accounts  only,  there  are  no  centrally  controlled  accounts  show- 
ing the  operations,  the  cost,  and  present  condition  of  prop- 
erties. This  is  true  for  the  same  reason  that  there  are  no  ac- 
counts giving  true  expenses.  When  an  expenditure  is  made, 
it  is  written  against  an  appropriation.  The  result  is  to  show 
the  balance  of  appropriations  unexpended  and  in  the  contra- 
entry  may  be  shown  the  total  or  aggregate  of  appropriations 
for  a  specified  purpose.  These  accounts  are  proper  and  neces- 
sary to  financial  control,  but  they  give  little  or  no  true  infor- 
mation with  respect  to  operating  results  or  proprietary  condi- 
tion. For  purposes  of  illustration,  let  us  assume  that  there 
are  certain  department  properties  to  be  administered  in  the 
form  of  office  buildings.  That  we  may  know  whether  the 
buildings  are  economically  managed  and  kept  in  regular  re- 
pair, an  account  and  report  should  be  made  on  eacli  property 
to  show  some  such  relations  as  the  following ; 


SUMMARY  OF  EXPENSES  OF  REAL  ESTATE. 


General  Administration  : 

Salaries— Wages 

Clerks,  etc 

Superintendents 

Office  Expenses 

Total  Cost  of  Administration 

Operation  : 
Salaries — Wages 

Elevator  Men 

Engineers,  Oilers  and  Helpers. . 

Electrician 

Janitors,  Porters,  Cleaners,  etc. 

Special  Officers  and  Watchmen 

Other  Wages— Operations 

Supplies 

Fuel,  Oil  and  Waste 

Electrical  Supplies 

Janitors'  Supplies 

Heat,  and  Light  Purchased..., 

Other  Supplies— Operations 

Total  Cost  of  Operations 


Total  of 

All 
Buildings 


Description  of  Properties 


City  Hall 


Hull  of 
Records 


Maintenance  : 

Repairs  and  Replacements 

Buildings  and  Grounds 

Elevators 

Engines  and  Boilers,  etc 

Electrical  Machinery 

Other  Repairs  and  Replacements 

Depreciation 

Total  Cost  of  Maintenance.... 


General  Property  Expenses  : 

Taxes 

Insurance  

Ground  Rents 

Other  Property  Expenses  ... 
Total    General    Property 
penses ....    


Ex- 


Total  Expenses 


A  proper  classification  of  accounts  needed  for  reporting  on 
the  proprietary  relations  of  buildings  of  the  character  above 
indicated  might  be  : 


I  HI 


I 


20 


21 


m 


i, 


Cost.  Depreciation. 

Sites  and  Grounds 

Buildings  Structures 

Elevators 

Power  &  Heating  Plants * 

Electrical  Equipment 

Fittings  &  Fixtures 

The  object  of  any  classification  of  property  accounts  ad- 
opted is :  to  show,  with  respect  to  each  building,  the  character 
and  original  cost  of  improvements,  additions  and  betterments  ; 
to  enable  the  board  of  estimate  and  apportionment,  as  well  as 
the  operative  heads,  to  make  provision  for  maintenance  based 
on  engineering  experience  ;  and  to  determine  whether  the  pro- 
visions for  repairs  and  replacements  are  adequate  or  if  not  the 
measure  of  depreciation  or  inadequacy  of  provision  for  wear 
and  waste — that  is  the  amount  of  expenditures  that  had  been 
deferred  during  a  current  period  for  which  provision  must  be 
made  in  subsequent  budgets.  As  a  means  of  determining 
whether  the  buildings  have  been  adequately  maintained,  there 
may  be  set  up  a  reserve  for  depreciation  (based  on  engineering 
experience)  which  reserve  would  be  regularly  charged  to 
expenses.  When  repairs  are  made  the  reserves  may  be  debited 
and  the  audited  vouchers  for  stock  accounts  credited  with  such 
an  accounting,  the  credit  balance  of  the  reserve  account  will 
show  the  amount  of  the  depreciation  ;  a  debit  balance  would 
be  in  the  nature  of  prepaid  expenses  or  betterments. 

As  a  means  of  obtaining  a  true  account  and  report  on  the 
operations  of  the  buildings,  it  would  be  necessary  to  have  both 
propeiiy  and  expense  accounts— the  same  property  and  expense 
accounts  as  if  no  consideration  were  to  be  given  to  the  method 
or  means  of  obtaining  funds.  A  clear  line  of  distinction, 
therefore,  should  be  drawn  between  the  supplies  and  materials 
used  and  supplies  and  materials  in  stock  ;  between  repairs  and 
replacements  actually  made  and  depreciation  ;  between  addi- 
tions and  betterments  to  property  and  expenses  of  operation 
and  maintenance  ;  between  the  taxes,  insurance  and  rents  or 
other  expense  charges  to  the  current  period  and  the  expendi- 
ture of  amounts  for  periods  past  or  future,  although  the  pay- 
ment for  taxes,  insurance,  rents,  etc.,  were  made  during  the 
current   period  and   were   chargeable   against   current  appro- 


priations. Such  relations  may  be  currently  and  accurately 
shown  only  by  having  the  property  accounts  and  expense 
accounts  and  by  keeping  these  accounts  entirely  distinct  from 
the  appropriation  accounts.  The  budgetary  accounts  and  the 
property  and  expense  accounts  are  essentially  different  in 
purpose  and  one  class  or  character  of  accou^its  may  not  be  suc- 
cessfully used  for  the  purpose  of  giving  the  data  intended  to 
be  shown  through  the  other. 

Administrative  Advantage  of  Operative  Statistics. 

When  Income  and  Expense  accounts  distinct  from  Appro- 
priation accounts  are  kept,  all  of  the  operative  financial  results 
are  brought  under  direct  accounting  control  and  may  be 
obtained  from  the  regular  footings  and  balances  shown  on  the 
books.  The  physical  and  operative  statistics  which  may  not 
be  stated  in  terms  of  dollars  and  cents,  however,  are  not  and 
may  not  be  regularly  retained  through  the  accounts.  These 
statistics  must  be  kept  in  separate  statistical  records  and 
should  be  so  co-ordinated  with  the  accounts  that  each  may  be 
used  to  supplement  the  other  in  giving  the  information  needed 
for  determining  any  factor  or  result  of  management  required. 

Detailed  Suggestions  as  to  Accounting  and  Reporting. 

We  have  not  attempted  in  this  report  to  do  more  than  sug- 
gest general  principles  of  accounting  and  reporting,  which  may 
be  applied  to  the  financial  as  well  as  the  operative  manage- 
ment of  a  City,  believing  that  if  the  principles  herein  suggested 
be  approved  by  the  City  Administration  further  investigation 
should  be  undertaken  with  a  view  of  receiving  a  detailed  plan 
of  accounting  control  for  permanent  adoption. 

Difficulties   to  be  Encountered  in  the   Revision  of  the 

Present  System. 

While  under  the  law  the  Comptroller  of  the  City  of  New 
York  is  authorized  to  introduce  and  enforce  upon  the  depart- 
ments any  form  of  accounting  which  he  may  direct,  the  diffi- 
culties to  be  encountered  by  him  in  any  effort  which  he  may 


22 


23 


'»|i 


make  to  reorganize  the  accounts  of  the  City  should  not  be 
passed  without  notice.  In  the  first  place  .the  departmental 
accounts  of  the  City  of  Greater  New  York  are,  in  a  large 
measure,  made  up  of  those  which  have  been  taken  over  from^  a 
number  of  dissimilar  municipalities  and  brought  together  by 
consolidation.  Each  of  these  municipalities  has  had  its  own 
administrative  methods  and  departmental  practices.  More- 
over, the  corporation  of  Greater  New  York  is  dependent  for 
the  details  of  administration  on  a  clerical  staff  which  is  not 
subject  to  direct  control  by  the  central  officers  of  the  City. 
The  present  method  of  appointment  and  removal  of  the  clerical 
staff  not  only  deprives  the  Comptroller  of  powers  to  enforce, 
but  even  the  heads  of  the  departments  themselves  have  in 
numerous  instances  found  themselves  unable  through  discipline 
or  otherwise  to  establish  a  policy  of  sufficient  independence  to 
enable  them  to  direct  and  accomplish  results  which  have  been 
deemed  essential  to  economic  and  efficient  management. 

Another  fact  to  be  recognized  is  that  the  Comptroller  is 
essentially  a  political  and  financial  officer.  He  is  elected  to 
a  position  of  responsibility  with  little  or  no  knowledge  of 
the  business  over  which  he  is  to  exercise  controlling  judg- 
ment and  with  accounting  methods  in  vogue  that  do  not 
provide  the  information  needed  in  the  performance  of 
his  duties.  Being  the  chief  financial  officer  of  the  City, 
little  of  his  time  or  attention  may  be  given  to  matters  of 
accounting  or  to  the  reorganization  of  the  system.  As  an 
officer  he  finds  himself  in  a  position  of  legal  responsibility 
for  the  acts  and  methods  of  hundreds  of  officials  and  non- 
official  subordinates,  who,  in  groups  and  departments,  are 
transacting  the  business  of  the  City  along  lines  of  inherited 
custom.  Not  having  the  appointment  of  the  accounting  heads 
of  other  departments,  within  his  control,  and  the  members  of 
the  staff  not  being  directly  subject  to  discipline,  the  institu- 
tion as  it  has  developed  moves  with  a  momentum  and 
possesses  an  inertia  so  great  at  times  to  annul  his  authority. 
To  organize  the  accounts  on  a  new  basis,  to  successfully  de- 
vise, install  and  supervise  a  system  of  control  over  income  and 
expenses,  as  well  as  over  appropriation  and  proprietary 
accounts,  would  require  the  undivided  attention  and  un- 
limited power  of  a  Comptroller  through  his  entire  period 
of  incumbency.       Being  engrossed  in  the  financial  affairs  of 


his   office,  he   must  necessarily   depend  upon   the   advice  of 
others. 

Recommendation  With  Respect  to  the  Offices  of  Comp- 
trolleu  and  commissioners  of  accounts. 

In  our  opinion,  a  change  both  in  accounting  methods  and 
in  organization  is  necessary  to  effective  administrative  control. 
In    effecting   such    change   two  distinct  lines  of   development 

are  possible  : 

(1)  The  hands  of  the  Comptroller  may  be  further  strength- 
ened, by  not  only  permitting  him,  when  it  may  be  considered  de- 
sirable, to  call  to  his  assistance  independent  professional  advice 
in  devising  and  installing  improved  methods,  but  also  by  giving 
hiui  a  freer  hand  in  the  removal  of  departmental  accounting 
heads  and  chief  assistants,  when,  in  his  judgment,  such  heads 
or  assistants  may  prove  inefficient,  thus  enabling  him  to  im- 
press upon  the  several  departments  of  the  City  such  reform  as 
may  be  properly  approved  for  the  purpose  of  instituting  a 
more  rigid  control  and  of  efficiently  administering  a  thorough 
system  of  executive  and  operative  accounts.  The  advantage 
of  the  plan  above  suggested  would  be  that  accounting  control 
would  be  centralized  and  there  might  be  the  greatest  economy 
and  uniformity  in  the  administration  of  the  system. 

Complementary  to  such  a  disposition  of  accounting  con- 
trol there  should  also  be  a  change  made  in  the  scope  and  pur- 
pose of  the  office  of  Commissioners  of  Accounts.  Although 
in  the  past  this  office  has  been  used  principally  as  a  statistical 
bureau  and  incidentally  as  an  auditing  bureau,  as  a  complement 
to  a  system  of  controlled  accounts  it  has  in  it  the  possibility 
of  becoming  one  of  the  most  important  divisions  of  city  gov- 
ernment. Instead  of  encumbering  the  staff  of  this  office  with 
the  making  of  perfunctory  reports  on  questions  of  current  ad- 
ministration the  information  with  respect  to  which  should 
come  regularly  from. the  departments,  the  office  of  Commis- 
sioners should  be  principally  occupied  (a)  with  auditing  the 
accounts  and  reports  of  departments,  and  (b)  as  a  court  of 
expert  inquiry  for  the  information  of  the  Mayor  with  respect 
to  administration,  ^.  e.,  as  an  inquisitorial  branch  of  the  execu- 
tive for  the  determination  of  facts  that  could  not  ordinarily  be 
reached  by  an  auditor  without  such  powers   as   are   possessed 


m 


m 


m 


ii! 


1  fli 


24 

by  the  Commissioners  of  Accounts  while  sitting  as  a  special 
court  with  authority  to  subpoena  witnesses,  and  to  require  the 
production  of  books  and  other  evidence  necessary  to  the  de- 
termination of  facts  not  found  on  the  face  of  the  records. 
Being  provided  with  an  adequate  system  of  departmental  ac- 
counts under  the  Comptroller  and  being  thus  armed  with  an 
independent  bureau  of  departmental  audit  under  the  Commis- 
sioner of  Accounts,  with  all  of  the  powers  of  the  legislature  to 
inquire  iuto  every  transaction  iu  which  the  city  may  be  inter- 
ested, there  is  no  reason  why  the  Mayor  may  not  fully  perform 
the  duties  imposed  by  the  charter,  viz  :  "  to  keep  himself  in- 
"  formed  of  the  doings  of  the  several  departments  "  ;  "  to  be 
"  vigilant  and  active  in  causing  the  ordinances  of  the  city  and 
"  laws  of  the  state  to  be  executed  and  enforced  ;  "  "  and  gen- 
**  erally  to  perform  all  such  duties  as  may  be  prescribed  for 
"  him." 

(2)  A  second  suggestion  involves  a  somewhat  more  radical 
change  in  Charter  provisions.  The  Comptroller  is  today  much 
encumbered  with  political  and  legislative  duties.  Originally, 
when  New  York  was  a  City  less  than  one-fifth  its  present  size, 
the  Comptroller  was  little  more  than  the  City's  chief  book- 
keeper and  auditing  oflHcer.  Today,  he  is  tlie  chief  ollicer  of 
financial  control.  As  a  member  of  the  board  of  Estimate  and 
Apportionment,  Siuking  Fund  Commission,  etc.,  and  as  a 
member  ex-oj/icio  of  other  boards,  these  functions  together 
vdth  his  other  duties  —  largely  legislative  —  have  tended 
to  ovei-shadow  his  original  accounting  functions.  Vested, 
by  statute,  with  power  to  dictate  the  form  of  ac- 
counting in  other  departments,  in  practice,  for  many  years 
past  the  Comptroller  has  found  little  or  no  time  to  give  such 
matters  his  attention,  and  the  heterogeneous  and  incongruous 
methods  of  accounting  inherited  from  the  past  have  gone  on 
unaltered.  On  the  other  hand,  the  Mayor,  charged  by  law 
with  the  duty  of  keeping  himself  advised  as  to  all  matters  of 
administration,  has  been  helpless  to  an  astonishing  degree. 
The  Comtnissioners  of  Accounts,  who  should  have  been  the 
means  of  enlightening  him,  through  digests  of  monthly  and 
annual  reports  made  by  the  departments,  have,  as  already 
stated,  been  largely  occupied  with  the  making  of  special  exami- 
nation which  have  taken  much  time  and  labor  and  which  would 
have  been  unnecessary  under  a  proper  system  of  accounting 


25 

control.  They  have,  it  is  true,  furnished  him  with  such 
information  as  he  received,  but  this  has  been  fragmentary  and 
so  far  in  arrears  of  the  transactions  reported  on  as  to  make 
them  of  little  value  for  administrative  purposes. 

In  1906  the  Legislature  established  in  the  Comptroller's 
Office,  a  Bureau  of  Statistics— another  blind  striving  to  obtain 
facts  through  special  investigation  which  should  come  regu- 
larly from  departmental  accounts  in  the  form  of  well  digested 
monthly  and  annual  reports.  The  city  is  in  the  attitude  of 
having  two  bureaus  for  the  assembling  and  reporting  of  statis- 
tics without  having  the  regular  accounting  machinery  for  sup- 
plying currently  the  information  necessary  for  making  such 
bureaus  effective. 

For  the  purpose  of  maintaining  effective  financial  control, 
all  bills  and  claims  against  the  city  should,  as  now,  be  approved 
by  the  Comptroller ;  he  should  remain  in  control  of  the  City's 
budgetary  and  financial  accounts,  and  he  should  be  left  free  to 
pursue  those  most  important  legislative  duties  which  have 
been  imposed  upon  him.  To  this  end  the  office  of  Comptroller 
may  be  entirely  relieved  from  all  responsibility  for  the  admin- 
istrative accounts,  i.  e.,  control  over  the  department  records 
essential  to  executive  efficiency  and  administrative  economy  may 
be  transferred  to  the  office  of  commmissioners  of  accounts.  As 
the  Mayor  is  made  responsible  for  administrative  results, 
so  he  may  then  have  in  his  hands,  the  means  of 
acquiring  knowledge  of  administrative  defects  and, 
through  his  power  of  removal,  may  then  enforce  remedies 
as  faults  are  made  known.  Were  this  second  princi- 
ple adopted  as  the  theory  of  reorganization  of  the  accounting 
methods,  the  Commissioners  of  Accounts  should  then  be  vested 
with  the  power  to  devise  and  install  bookkeeping  methods  and 
systems  in  all  departments  of  the  City  Government,  excepting 
in  the  office  of  the  Comptroller  and  should  be  given  power  to 
remove  departmental  accounting  heads. 

Another  advantage  of  having  the  accounts  and  statistics 
which  look  toward  executive  or  operative  control  (as  distin- 
guished from  fund  and  appropriation  accounts)  devised,  in- 
stalled and  supervised  by  the  Commissioners  of  Accounts, 
would  be  that  the  Commissioners  are  appointed  by  and  respon- 
sible to  the  Mayor.  The  Comptroller  is  by  law  the  principal 
officer  ol  financial  control  and  his  administrative  responsibili- 


26 


(1 

ii 


ties  under  the  Charter  have  been  mainly  of  this  character.  As 
such  officer,  it  has  been  incumbent  on  him  to  devise  and  install 
a  system  of  controllinf*  financial  accounting  ;  but  having  no  re- 
sponsibility for  the  economy  or  efficiency  of  departments,  and 
being  independent  of  the  Mayor,  there  has  been  no  provision 
in  the  Charter  making  it  his  duty  to  devise,  install  or  control 
executive  and  operative  accounts.  The  interests  of  the 
Comptroller  having  been  centered  in  financial  control, 
*'the  forms  for  keeping  and  rendering  the  accounts," 
have  been  principally  for  his  information  only.  As  a  result, 
the  Mayor  as  Chairman  of  the  Board  of  Estimate  and  Appor- 
tionment, has  been  subordinate  in  elicited  intelligence  to  the 
Comptroller ;  as  the  chief  executive  of  Departments,  he  has 
been  dependent  for  current  information  on  one  who  has  no 
official  interest  iu,  or  responsibility  for,  departmental  results  ; 
he  has  been  compelled  to  administer  his  office  with  no  ade- 
quate method  for  assembling  operative  administrative  data. 

In  any  case,  it  is  our  opinion  that  the  Charter  should  be  so 
amended  ns  to  render  accounting  control  consistent  with  effi- 
cient administration.  In  other  words,  given  an  adequate  sys- 
tem of  accounts,  the  Mayor  would  seem  to  have  ample  power 
to  protect  the  interests  of  the  city.  Being  constituted  by  law 
"  a  magistrate,"  as  well  as  '•  the  chief  executive  officer  of  the 
city,"  and  having  at  will  the  power  to  appoint  and  remove 
Commissioners  of  Accounts  who  have  the  fullest  authoritv, 
not  only  to  audit  departmental  accounts,  but  also  to  sit  as  a 
court  of  inquiry,  there  would  seen  to  be  in  the  hands  of  the 
Mayor  the  means  not  only  of  protecting  the  city  against  spoil- 
ation  through  contracts,  but  also  to  establish  the  incompetency 
or  infidelity  of  those  iu  the  Civil  Service  who  in  the  past  have 
enjoyed  immunity  from  discipline. 


:\ 


[32531] 


lit 


f 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


PROPOSED  REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND  REVENUE. 


NOVEMBER,  1907. 


New  York  : 

MARTIN  B.  BROWN  COMPANY.  PRINTERS  AND  SPATIONERS 

Nos.  49  TO  57  Park  Place. 

1907. 


1 


INTENTIONAL  SECOND  EXPOSURE 


I     il 


26 


i 


ties  under  the  Charter  have  been  mainly  of  this  character.  As 
such  officer,  it  has  been  incumbent  on  him  to  devise  and  install 
a  system  of  controlling  financial  accounting  ;  but  having  no  re- 
sponsibility for  the  economy  or  efficiency  of  departments,  and 
being  independent  of  the  Mayor,  there  has  been  no  provision 
in  the  Charter  making  it  his  duty  to  devise,  install  or  control 
executive  and  operative  accounts.  The  interests  of  the 
Comptroller  having  been  centered  in  financial  control, 
**the  forms  for  keeping  and  rendering  the  accounts," 
have  been  principally  for  his  information  only.  As  a  result, 
the  Mayor  as  Chairman  of  the  Board  of  Estimate  and  Appor- 
tionment, has  been  subordinate  in  elicited  intelligence  to  the 
Comptroller ;  as  the  chief  executive  of  Departments,  he  has 
been  dependent  for  current  information  on  one  who  has  no 
official  interest  in,  or  responsibility  for,  departmental  results  ; 
he  has  been  compelled  to  administer  his  office  with  no  ade- 
quate method  for  assembling  operafive  administrative  data. 

In  any  case,  it  is  our  opinion  that  the  Charter  should  be  so 
amended  as  to  render  accounting  control  consistent  with  effi- 
cient admiuistration.  In  other  words,  given  an  adequate  sys- 
tem of  accounts,  the  Mayor  would  seem  to  have  ample  power 
to  protect  the  interests  of  the  city.  Being  constituted  by  law 
"  a  magistrate,"  as  well  as  "  the  chief  executive  officer  of  the 
city,"  and  having  at  will  the  power  to  appoint  and  remove 
Commissioners  of  Accounts  who  have  the  fullest  authoritv. 
not  only  to  audit  departmental  accounts,  but  also  to  sit  as  a 
court  of  inquiry,  there  would  seen  to  be  in  the  hands  of  the 
Mayor  the  meaus  not  only  of  protecting  the  city  against  spoil- 
ation  through  contracts,  but  also  to  establish  the  incompetency 
or  infidelity  of  those  in  the  Civil  Service  who  in  the  past  have 
enjoyed  immunity  from  discipline. 


[32531] 


\ 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


PROPOSED  REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND   REVENUE. 


NOVEMBER,  1907. 


Nbw  York  : 

MARTIN  B.  BROWN  COMPANY,  PRINTERS  AND   STATIONERS 

Nos.  49  TO  S7  Park  Place. 

1907. 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


PROPOSED  REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND  REVENUE. 


NOVEMBER,  1907. 


I 


New  York : 

MARTIN  B.  BROWN  COMPANY,  PRINTERS  AXD   STATIONERS 

Nos.  49  TO  57  Park  Plach. 

1907. 


Chairman, 
Edgar  J.  Levey. 


Committee  on  Taxation  and  Revenue. 


Lawson  Purdy, 
Edwin  R.  A.  Seligman,, 
Francis  Lynde  Stetson, 


Morris  K.  Jesup, 
Joseph  Haag, 
Edward  L.  Heydecker. 


Committee  on  The  City  Debt  and  Special  Assessments. 


Edward  M.  Shepard, 
John  L.  Cadwalader, 


Charles  T.  Barney, 
Francis  Key  Pendleton, 


Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


THE  COLLECTION  OF  ARREARS  OF  REAL  ESTATE 
TAXES  AND  ASSESSMENTS. 

Introduction. 

Long  experience  in  the  Finance  Department  convinced 
Mr.  Joseph  Haag,  when  Chief  Bookkeeper,  that  the  method 
for  the  collection  of  arrears  of  taxes  and  assessments  was 
hopelessly  inadequate.  In  1902  he  presented  to  the  Comp- 
troller an  outline  of  what  he  regarded  as  a  satisfactory  method. 
No  steps  were  taken  to  work  out  this  plan  in  detail  until  a 
year  and  a  half  ago,  when  Mr.  Haag  presented  the  plan  to  Mr. 
Purdy,  Chairman  of  the  Committee  on  Taxation  and  Revenue 
of  the  Mayor's  Advisory  Commission.  Mr.  Purdy  then  pre- 
pared a  rough  draft  of  a  bill  amending  Title  5  of  Chapter 
XVII.  of  the  Charter,  which  was  printed  and  submitted  to  the 
Committee  on  Taxation  and  Revenue.  The  plan  was  so  far 
approved  by  the  Committee  in  principle  that  it  seemed  desir- 
able to  perfect  the  bill.  The  bill  as  prepared  by  Mr.  Purdy 
was  submitted  to  Mr.  Walter  Lindner,  Solicitor  of  the  Title 
Guarantee  and  Trust  Company,  and  he  became  so  much 
interested  in  the  plan  that  he  was  kind  enough  to  volunteer  to 
aid  the  Committee.  Mr.  Lindner  has  now  carefully  revised 
the  bill,  inserting  the  provisions  necessary  to  make  it 
thoroughly  workable,  having  in  view  the  necessity  for  such 
perfection  of  detail  as  will  result  in  the  City  being  able  to 
insure  a  perfectly  good  title  to  the  purchaser  of  real  property 
when  ultimately  sold  for  taxes. 

Mr.  Lindner  has  had  in  mind  also  the  necessity  for  mak- 
ing the  tax  liens  provided  for  in  the  bill  an  attractive  invest- 
ment. The  Committee  has  also  had  the  benefit  of  the  advice 
and  assistance  of  Mr.  Edward  L.  Heydecker,  the  Editor  of 
the  General  Laws  of  New  York,  now  a  member  of  the  Committee. 


I 


The  Present  Method. 
The  present  method  of  enforcing  the  payment  of  arrears  of 
real  estate  taxes,  assessments  and  water  rents  is  contained  in 
Title  5  of  Chapter  XVII.  of  the  Charter  and  was  taken,  almost 
without  change,  from  the  Charter  of  the  old  City  of  New  York, 
called  The  Consolidation  Act.  The  plan  in  substantially  its  pres- 
ent form  has  been  in  force  for  many  years.  Briefly  described  it  is 
as  follows: 

Taxes,  assessments  and  water  rents  are  liens  upon  the  land 
assessed  and  are  preferred  in  payment  to  all  other  charges.  When 
taxes  or  assessments  are  unpaid  for  three  years  and  water  rents 
for  four  years  it  is  lawful  for  the  Collector  of  Assessments  and 
Arrears,  under  the  direction  of  the  Comptroller,  to  advertise  for 
sale  a  lease  of  the  property  for  the  lowest  term  of  years  at  which 
any  person  shall  offer  to  take  the  same  in  consideration  of  advanc- 
ing the  arrears,  with  interest  at  the  rate  of  seven  per  cent,  to  the 
time  of  sale.  The  purchaser  of  such  leases  receives  a  certificate 
of  sale  describing  the  property,  the  term  of  the  lease,  the  amount 
of  arrears,  interest,  &c.,  advanced  in  payment  for  the  lease  and  the 
time  when  the  purchaser  will  be  entitled  to  the  lease  of  the  prop- 
erty. If  there  are  no  bids  for  a  lease  of  any  property  offered  for 
sale,  the  City  of  New  York  may  bid  it  in  for  the  city. 

If  no  one  interested  m  the  property  pays  the  amount  mentioned 
in  the  certificate  of  sale  within  two  years  from  the  date  of  the 
certificate,  with  interest  at  the  rate  of  fourteen  per  cent.,  the 
Comptroller  shall  execute  to  the  purchaser  a  lease  of  the  prop- 
erty for  the  term  of  years  for  which  it  has  been  sold.  The  lease 
cannot  be  executed  and  delivered  until  six  months  after  due 
publication  of  a  notice  that  unless  the  property  be  redeemed 
by  a  certain  day,  the  lease  will  be  conveyed  to  the  purchaser. 


Objections  to  the  Sale  of  Leases. 

The  experience  of  the  old  City  of  New  York  with  this  method 
of  enforcing  payment  of  arrears  has  been  that  a  very  small  per 
centage  of  the  property  put  up  for  sale  has  been  bid  in  by  individ- 
uals, the  bulk  of  the  property  being  bid  in  by  the  representatives 
of  the  city,  and  the  amount  realized  from  actual  sales  is  inconsider- 
able. As  the  sole  object  of  the  sale  is  to  realize  the  amount  due 
the  city,  the  whole  object  of  the  plan  is  defeated. 

Because  of  the  small  number  of  bidders,  the  leases  are  very 
long  and  the  risk  to  the  owners  of  property  correspondingly  great 
if  the  lease  should  be  upheld.  Leases  are  sold  for  five  hundred 
years.  This  is  practically  equivalent  to  the  sale  of  the  fee.  Under 
such  circumstances,  the  owner  of  the  property  would  receive 
nothing,  his  property  would  be  totally  lost  because  he  had  failed 
or  neglected  to  pay  the  city  within  the  time  required  by  law  a  small 
percentage  of  its  value.  In  view  of  this  great  danger  to  owners 
of  property  the  Courts  have  been  exceedingly  vigilant  to  detect 
flaws  in  the  procedure  so  that  it  is  commonly  believed  that  a  valid 
lease  sold  for  arrears  is  almost  unknown.  With  the  value  of  the 
leases  so  utterly  discredited,  it  is  no  wonder  there  are  few  bidders 
and  that  when  leases  are  sold  the  term  of  years  is  abnormally 
long. 

So  poor  has  been  the  result  of  these  sales  of  leases  that 
there  have  been  only  six  such  sales  in  the  last  thirty-two  years. 
The  objections  may  be  summarized  as  follows :  The  expense 
and  the  danger  to  property  owners  is  excessive  and  unreason- 
able. The  City  is  unable  by  the  sale  of  leases  to  collect  its 
revenue  when  it  requires  it. 

Some  persons  have  suggested  that  the  City  of  New  York 
should  adopt  the  remedy  existing  in  the  former  City  of  Brooklyn 
by  the  sale  at  auction  of  the  fee  of  the  property.  Although  this 
method  was  effective  in  enforcing  the  payment  of  arrears,  it  is 


I 


objectionable  because  too  severe  on  property  owners  whose  prop- 
erty may  be  sacrificed  and  because  it  is  difficult  to  convey  good 
title  by  a  sale  for  taxes.  Titles  are  often  clouded  and  purchasers 
being  obliged  to  take  the  risk  of  a  bad  title  do  not  bid  the  full 
value  of  the  property. 

The  following  plan,  it  is  deemed,  would  be  eflFective  in  collect- 
ing arrears  promptly  and  at  the  same  time  would  impose  no 
penalties  on  property  owners  and  in  many  cases  would,  in  fact,  re- 
duce the  amount  of  interest  they  may  now  be  required  to  pay. 

The  Remedy. 

To  be  satisfactory  any  method  of  collecting  arrears  of  real 
estate  taxes,  assessments  and  water  rents  must  combine  two 
qualities : 

The  remedy  must  be  effective  and  enable  the  city  to  collect  ar- 
rears promptly. 

The  remedy  must  cause  property  owners  the  least  possible  in- 
convenience and  risk. 

The  proposed  remedy  is  deemed  to  meet  these  conditions.  It 
is  briefly  described  as  follows : 

As  soon  as  taxes,  assessments  and  water  rents  are  laid,  a  lien 
attaches  to  the  property  in  favor  of  the  city  which  is  prior  to  any 
and  all  other  liens.  When  taxes  or  assessments  are  three  years 
in  arrears,  or  water  rents  four  years,  the  lien  of  such  arrears  will 
be  sold  at  auction  to  the  person  who  shall  bid  the  lowest  rate  per 
cent,  not  exceeding  twelve.  Upon  payment  of  the  purchase  money 
a  conveyance  of  the  "tax  lien,"  payable  in  three  years,  will  be 
executed  by  the  city  to  the  purchaser. 

The  city  will  guarantee  the  validity  of  the  lien  so  that  the  only 
risk  taken  by  the  purchaser  will  be  the  sufficient  value  of  the 
property  affected  by  the  lien  and  the  possible  trouble  of  collection. 


\ 


"  Transfers  of  tax  liens  "  will  be  registered  in  the  office  of 
the  Collector  of  Assessments  and  Arrears  and  will  be  record- 
able in  the  office  of  the  Register.  The  procedure  for  collection 
will  be  the  same  as  for  the  collection  of  a  mort^asre. 

A  "  transfer  of  tax  lien  "  will  provide  that  the  whole  of  the 
principal  sum  which  the  *'  transfer  of  tax  lien  "  is  given  to 
secure  shall  become  due  at  the  option  of  the  owner  thereof 
after  default  in  the  payment  of  interest  for  thirty  days  or  after 
default  in  the  payment  of  any  tax,  assessment  or  water  rent  for 
three  years  and  three  months.  This  provision  will  very 
nearly  insure  the  continuous  future  payment  of  arrears,  sub- 
sequent to  the  sale  of  a  "  tax  lien,"  as  the  owner  of  the  prop- 
erty must  pay  or  suffer  the  foreclosure  of  the  "  tax  lien." 

Any  person  having  an  interest  in  property  affected  by  a  "tax 
lien"  may  discharge  the  same  before  maturity  on  giving  thirty 
days'  notice  to  the  holder  of  the  transfer  thereof  upon  payment 
of  the  principal  with  interest  to  the  next  succeeding  interest 
period. 

"Tax  liens"  will  be  exempt  from  taxation  and  will  be  made 
legal  investments  for  Savings  Banks  in  case  they  do  not  exceed 
half  the  assessed  value  of  the  property  affected. 

Advantages. 

"Tax  liens"  will  be  a  thoroughly  safe  investment,  beino-  abso- 
lutely  the  first  liens  on  city  real  estate.  "Tax  liens"  for  large  sums 
should  sell  readily  at  a  low  rate  of  interest  and  even  "tax  liens" 
for  small  sums  should  be  a  profitable  investment  and  sell  easily  at 
some  rate  less  than  the  maxinnmi.  It  is  probable  that  some  per- 
sons and  corporations  will  undertake  the  purchase  of  "tax  liens" 
as  a  business,  perhaps  issuing  debenture  bonds  thereby  secured. 

If  "tax  liens"  are  readily  salable  the  city  will  no  longer  be  kept 
out  of  the  use  of  its  proper  income.  The  trouble  and  expense  of 
collection  will  be  shifted  from  the  city  to  private  parties. 


10 


lit 


M 


ll* 


From  the  standpoint  of  the  taxpayer,  the  proposed  plan  has 
the  great  advantage  that,  the  payment  of  taxes  over  three  years 
in  arrears  can  be  postponed  for  three  years  more  upon  payment  of 
mterest  and  subsequent  taxes.  Moreover,  the  taxpayer,  if  a 
resident,  will  always  get  personal  notice,  and  will  generally  get 
personal  notice  even  if  a  non-resident,  when  any  action  is  brought 
which  might  result  in  the  loss  of  the  property. 

Description  of  the  Bill. 

The  Bill  amends  Chapter  XVII.  of  the  New  York  Charter. 

Section  i  of  the  Bill  amends  the  caption  of  Chapter  XVII., 
by  inserting  the  words,  "  tax  liens  on  "  so  that  Title  5  shall 
read :  "  Sales  of  tax  liens  on  lands  for  taxes,  assessments  and 
water  rents." 

Section  2  of  the  Bill  amends  Charter  Section  909,  chang- 
ing the  definition  of  water  rents,  by  making  it  more  specific. 

Section  3  amends  Charter  Section  920,  as  amended  by 
Chapter  303  of  the  Laws  of  1907,  by  inserting  the  words  "  the 
tax  lien." 

Section  4  amends  Charter  Section  964  by  inserting  the 
words  "  the  tax  lien." 

Section  5  of  the  Bill  amends  the  caption  of  Title  5  so  as 
to  conform  to  the  caption  of  the  Chapter. 

Section  6  amends  Charter  Section  1017  by  more  carefully 
defining  "water  rents."  This  section  determines  the  time 
when  taxes,  assessments  and  water  rents  become  liens. 

Charter  Sections  1018  and  1019  remain  unchanged.  They 
relate  to  the  publication  of  notice  of  the  confirmation  of  assess- 
ments, and  the  charging  of  interest,  if  assessments  are  unpaid 
after  sixty  days. 

Section  7.  Charter  Section  1020  provides  the  rate  of 
interest  to  be  charged  on  all  arrears  of  taxes  and  assessments. 
The  section  is  amended  to  conform  to  the  sale  of  the  tax  lien 
instead  of  a  lease. 


It 

Section  8  amends  Charter  Section  102 1,  by  providing  for 
sale  of  the  tax  lien  for  arrears  of  assessments,  and  provides 
for  apportionment  by  the  Board  of  Assessors  when  parcels  are 
divided. 

Sections  9  and  10  make  slight  verbal  changes  in  Charter 
Sections  1023  and  1024,  otherwise  1022,  1023,  1023a  and  1024 
remained  unchanged.  They  relate  to  water  rents ;  the  return  of 
arrears  to  the  Collector  by  the  Receiver  of  Taxes;  notifying 
taxpayers  of  assessments  and  provision  for  the  inclusion  of 
water  rents  in  the  assessment  rolls. 

Section  ii  amends  Charter  Section  1025.  This  section 
provides  for  the  record  of  arrears  on  the  assessment  rolls  and 
remains  substantially  unchanged. 

Section  12  amends  Charter  Section  1026.  This  section 
provides  for  notices  of  arrears  to  be  printed  on  tax  bills  and 
is  amended  to  conform  to  the  new  remedy,  so  that  notice  of 
the  sale  of  a  "  tax  lien  "  shall  be  given  instead  of  notice  of 
the  sale  of  the  lease. 

Section  13  amends  Charter  Section  1027.  This  section 
now  provides  the  procedure  for  the  sale  of  leases  and  is 
amended  so  as  to  provide  for  the  sale  of  "  tax  liens."  Such 
procedure  is  substantially  unchanged.  It  provides  that  when 
taxes  or  assessments  are  unpaid  for  three  years  or  water  rents 
for  four  years,  the  Collector  of  Assessments  and  Arrears  shall 
advertise  "  tax  liens  "  for  sale  for  a  term  of  three  years  to  the 
person  who  bids  the  lowest  rate  of  interest,  not  exceeding 
twelve  per  cent.  The  Collector  shall  give  to  the  purchaser  of 
"  tax  liens  "  a  "  transfer  of  tax  lien,"  describing  the  property 
encumbered  by  the  lien;  the  sum  to  be  paid;  the  amount 
advanced  and  the  rate  of  interest.  All  the  provisions  for 
advertising  such  sales  are  preserved  unchanged. 

Section  14.  Charter  Section  1028  is  repealed.  It  pro- 
vided for  the  advertisement  of  contiguous  lots  as  one  parcel, 
which  would  endanger  the  accuracy  of  the  procedure. 


I 


1$ 


Section  15.  Charter  Section  1029  is  renumbered  so  as  to 
he  102S,  and  is  unchanged  in  substance.  It  provides  that  the 
(-omptroller  may  postpone  sales. 

Skction  16.  Charter  Section  1030  is  renumbered  so  as  to  be 
Section  1029.  It  provides  that  the  Collector  of  Assessments  and 
Arrears  shall  conduct  the  sales  and  is  amended  so  as  to  provide 
for  a  deposit  or  payment  on  account  by  the  purchaser  at  the  time 
of  sale  upon  terms  and  conditions  prescribed  by  the  Comptroller. 
"  Transfers  of  Tax  liens  "  shall  be  delivered  to  the  purchaser, 
without  charge,  upon  payment  of  the  amount  due.  "  Trans- 
fers of  Tax  liens "  shall  be  executed  by  the  Collector  of 
Assessments  and  Arrears  in  the  name  of  The  City  of  New 
York.  *'  Transfers  of  Tax  liens  "  not  paid  for  within  thirty 
days  may  be  canceled  and  the  deposit  forfeited,  and  a  resale 
made. 

Section  17.  Charter  Sections  1031  to  1049,  both  inclusive, 
are  repealed.  All  these  Sections  relate  solely  to  the  procedure  to 
be  followed  in  case  of  the  sale  of  leases  and  have  no  bearing  upon 
the  sale  of  "tax  liens." 

Section  18  enacts  a  new  section  to  be  numbered  1030, 
defining  "  transfer  of  tax  lien  "  and  describing  its  nature  and 
incidents. 

Section  19  enacts  a  new  section  to  be  numbered  1031. 
It  provides  for  a  public  record  of  sales  of  "  Tax  liens  "  to  be 
kept  by  the  Collector  of  Assessments  and  Arrears.  A 
"  transfer  of  tax  lien  "  and  a  duly  acknowledged  assignment 
thereof  shall  be  deemed  conveyances  under  the  Real  Property 
Law  and  may  be  recorded  as  such.  Failure  to  record  does  not 
invalidate  the  lien.  The  various  records  may  be  read  in 
evidence. 

Section  20  enacts  a  new  section  to  be  numbered  1032. 
This  section  defines  the  rights  of  purchasers  of  tax  liens. 


Section  21  enacts  a  new  section  to  be  numbered  1033, 
providing  for  the  discharge  of  the  tax  lien  when  paid. 

Section  22  enacts  a  new  section  to  be  numbered  1034, 
providing  for  the  exemption  from  taxation  of  tax  liens. 

Sections  23,  24,  25,  26,  27,  28  and  29  enact  new  sections 
to  be  numbered  1035,  1036,  1037,  1038,  1039,  ^040  and  1041, 
providing  the  procedure  for  foreclosure  of  tax  liens. 

Section  30  adds  a  new  section  to  be  Section  1042.  It  pro- 
vides for  the  procedure  when  no  bid  for  a  "tax  lien"  is  received. 
In  this  case  the  Comptroller  and  Corporation  Counsel  shall  in- 
vestigate the  facts  and  reduce  the  amount  to  a  sum  for  which, 
in  their  judgment,  a  "tax  lien"  bearing  twelve  per  cent,  interest 
can  be  sold.  They  shall  file  a  certificate  in  writing  setting  forth 
the  amount  so  determined,  with  their  reasons.  Such  "tax  lien" 
shall  then  be  advertised  for  sale  to  the  person  who  shall  bid  the 
highest  amount  of  money  in  excess  of  the  amount  fixed  by  the 
Comptroller  and  Corporation  Counsel.  If  still  no  bid  is  received, 
the  Comptroller  and  Corporation  Counsel  shall  reconsider  their 
determination  and  proceed  as  before.  This  Section  is  added  in 
order  that  some  collection  may  be  made  by  the  city  and  title  cleared 
in  cases  where  the  arrears  equal  or  exceed  the  value  of  the  prop- 
erty. 

Sections  31  and  32  enact  new  sections  to  be  numbered 
1043  ^^^  I044>  providing  for  the  reimbursement  of  the  owner 
of  a  "  transfer  of  tax  lien  "  in  case  the  tax  lien  shall  be  vacated 
or  canceled  in  whole  or  in  part. 

Section  33  enacts  a  new  section  to  be  numbered  1045. 
It  provides  that  owners  of  property  may  question  the  validity 
of  tax  liens  on  their  property ;  that  such  shall  be  referred  to 
the  Corporation  Counsel,  who  may  direct  the  surrender  of  a 
transfer  of  tax  lien  and  the  refunding  of  the  amount  paid 
therefor. 


i 


Section  34  enacts  a  new  section  to  be  numbered  1046. 
It  provides  that  the  Corporation  Counsel  shall  be  notified  of 
any  proceeding  adverse  to  the  validity  of  a  tax  lien  and  may 
intervene  in  such  proceeding. 

Section  35  enacts  a  new  section  to  be  numbered  1047. 
It  provides  for  reimbursement  of  the  holder  of  a  transfer  of 
lien  which  is  invalid  in  whole  or  in  part,  and  directs  the  resale 
of  the  tax  lien. 

Section  36.  Charter  Section  1050  is  renumbered  so  as  to 
be  Section  1048.  It  provides  for  the  delivery  of  a  duplicate 
in  case  the  "  transfer  of  tax  lien  "  is  lost,  and  is  otherwise 
without  change  of  substance,  except  that  the  provision  for 
registration  is  omitted  here  and  inserted  in  Section  103 1. 

Section  37.  Charter  Section  105 1  is  renumbered  so  as  to 
be  1049.  It  provides  that  bills  for  the  arrears  of  taxes  and 
assessments  shall  be  furnished  when  requested.  It  also  pro- 
vides that  the  receipt  of  the  Collector,  countersigned  by  the 
Comptroller,  shall  free  the  property  from  all  liens  except  the 
lien  of  "transfers  of  tax  liens"  duly  sold.  The  section  is 
unchanged  except  in  so  far  as  was  necessary  to  conform  the 
procedure  to  the  method  of  collection  by  the  sale  of  "tax 
liens  "  instead  of  leases. 

Section  38.  Charter  Section  1052  is  renumbered  so  as  to 
be  1050.  It  provides  that  fees  for  searches  shall  be  included  in 
the  bills  mentioned  in  the  preceding  section  and  is  unchanged. 

Section  39  repeals  Charter  Section  1053.  It  provided  for 
a  complete  record  of  sales,  now  contained  in  Section  103 1. 

Section  40.  Charter  Section  1054  is  renumbered  so  as  to 
be  Section  105 1.  It  provides  for  the  preservation  of  affidavits 
of  the  publication  of  notices  and  remains  unchanged. 

Section  41.  This  section  is  not  a  part  of  the  Charter  and  is 
designed  to  save  to  the  city  and  the  taxpayers  all  rights 
acquired  before  the  passage  of  the  Act. 


15 

An  Act  to  amend  the  Greater  New  York  Charter  relative  to 
sales  of  lands  for  taxes,  assessments  and  water  rates. 
The  People  of  the  State  of  New  York,  represented  in  Senate  and 
Assembly,  do  enact  as  follozvs: 

Section  i.  The  caption  of  Chapter  XVII.  of  the  Greater 
New  York  Charter,  as  re-enacted  by  chapter  four  hundred  and 
sixty-six  of  the  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  so  as  to  read  as  follows: 

CHAPTER  XVII. 

Taxes  and  Assessments. 

Title  I.  Department  of  Taxes  and  Assessments; 
powers  and  duties. 

Title  2.  Assessments  for  local  improvements  other 
than  those  confirmed  by  a  Court  of 
Record. 

Title  3.  Vacating  and  modifying  assessments  for  local 
improvements  other  than  those  confirmed 
by  a  Court  of  Record. 

Title  4.     Opening  Streets  and  Parks. 

Title  5.  Sales  of  tax  liens  on  lands  for  taxes,  assess- 
ments and  water  rates. 

§  2.  Section  nine  hundred  and  nine  of  the  Greater  New 
York  Charter,  as  re-enacted  by  chapter  four  hundred  and 
sixty-six  of  the  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  so  as  to  read  as  follows : 

Assessment  Rolls  to  Remain  in  Custody  of   Board  of 

Aldermen. 

§  909.  The  tax  or  assessment  rolls,  when  finally  sub- 
mitted to  the  board  of  aldermen  on  the  first  Monday  of  July 
in  each  year,  shall  remain  in  its  custody,  but  the  president  of 
the  board  may,  by  written  permission,  permit  access  to  them, 
and  he  is  hereby,  in  the  name  of  the  board  of  aldermen  and  as 
its  act,  authorized  and  directed  to  cause  to  be  properly  esti- 
mated and  computed  the  taxes  annually  imposed,  and  cause 


i6 


the  same  to  be  properly  set  down  or  extended  in  the  several 
assessment  rolls  or  tax  books,  as  required  by  the  next  section. 
It  shall  also  be  the  duty  of  said  president  to  cause  the  items 
of  said  taxes  to  be  carefully  added,  and  to  set  down  the 
amount  of  the  same  therein ;  and  when  completed  to  deliver 
the  tax  books  relating  to  real  estate  to  the  comptroller,  in 
order  that  the  unpaid  water  rents,  expenses  of  meters,  their 
connections  and  setting,  water  rates  and  other  lawful  charges 
for  the  supply  of  water  measured  by  meters  of  any  [eachj 

preceding  year  may  be  entered  therein.  After  such  completion 
of  the  assessment  rolls  or  tax  books  it  shall  be  the  duty  of  the 
city  clerk  to  procure  the  proper  warrants  authorizing  and 
requiring  the  receiver  of  taxes  to  collect  the  several  sums 
therein  mentioned  according  to  law,  and  such  warrants  need 
be  signed  only  by  the  president  of  the  board  of  aldermen,  and 
countersigned  by  the  city  clerk,  and  immediately  thereafter 
the  president  of  the  board  of  aldermen  shall  deliver  the  said 
assessment  rolls,  with  the  warrants  aforesaid  annexed  thereto, 
to  the  receiver  of  taxes,  at  the  same  time  notifying  the  comp- 
troller of  the  amount  of  taxes  in  each  book,  in  order  that  he 
may  cause  the  proper  sum  to  be  charged  to  the  receiver  for 
collection. 

§  3.  Section  nine  hundred  and  twenty  of  said  law,  as 
amended  by  chapter  three  hundred  and  three  of  the  laws  of 
nineteen  hundred  and  seven,  is  hereby  amended  so  as  to  read 
as  follows: 

Undivided  Parts  of  Taxes:     Payment  of. 

§  920.  If  a  sum  of  money  in  gross  has  been  or  shall  be 
taxed  upon  any  lands  or  premises,  any  person  or  persons 
claiming  any  divided  or  undivided  part  thereof  may  pay  such 
part  of  the  sum  of  money  so  taxed,  also  of  the  interest  and 
charges  due  or  charged  thereon,  as  the  said  comptroller  may 
deem  to  be  just  and  equitable.  The  department  of  taxes  and 
assessments  shall  apportion  the  assessed  valuation  of  such 


lands  or  premises  when  requested  by  the  comptroller  so  to  do, 
and  shall  certify  such  apportionment  to  him.  The  determina- 
tion of  the  said  comptroller  shall  be  based  upon  such  appor- 
tionment so  certified.  The  remainder  of  the  sum  of  money 
so  taxed,  together  with  the  interest  and  charges,  shall  be  a 
lien  upon  the  residue  of  the  land  and  premises  only,  upon 
which  residue  the  tax  lien  may  be  sold  to  satisfy  the  residue 
of  such  tax,  interest  or  charges,  in  the  same  manner  as  though 
the  residue  of  said  tax  had  been  imposed  upon  the  residue  of 
said  lands  or  premises. 

§  4.  Section  nine  hundred  and  sixty-four  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Reassessment. 

§  964.  Any  lands  which  may  be  discharged  from  any  lien 
for  an  assessment  for  any  local  improvement  or  as  to  which  a 
sale  [for  non-payment]  of  the  tax  lien  for  such  assessments 
authorized  to  be  made  by  section  ten  hundred  and  twenty- 
seven  of  this  act  has  been  vacated  or  set  aside  may  be  again 
assessed  in  the  manner  provided  by  law,  for  such  amount  as 
would  have  been  justly  chargeable  if  fraud  or  irregularity  had 
not  been  committed ;  and  the  amount  so  assessed  shall  be  a 
lien  on  said  lands  until  paid,  and  shall  be  collectible  in  the 
manner  provided  by  law  for  the  collection  of  assessments,  but 
all  proceedings  to  make  a  new  assessment  shall  be  at  the 
expense  of  the  city. 

§  5.  The  caption  of  Title  5  of  Chapter  XVII.  of  the 
Greater  New  York  Charter,  as  re-enacted  by  chapter  four 
hundred  and  sixty-six  of  the  Laws  of  nineteen  hundred  and  one, 
is  hereby  amended  so  as  to  read  as  follows : 

Title  5.     Sales  of  tax  liens  on  lands  for  taxes,  assess- 
ments and  water  rates. 

§  6.  Section  ten  hundred  and  seventeen  of  said  law  is  hereby 
amended  so  as  to  read  as  follows : 


I 


When  Taxes  and  Water  Rents  to  be  Liens  on  Lands 

Assessed. 

§  1017.  All  taxes  and  all  assessments  for  local  improve- 
ments and  all  water  rents,  expenses  of  water  meters,  their 
connections  and  setting-,   water  rates  and  other  lawful  charges 

for  the  supply  of  water  measured  by  meters,  and  the  interest 
and  charges  thereon,  which  may,  in  The  City  of  New  York,  as 
by  this  act  constituted,  hereafter  be  laid  or  may  have  hereto- 
fore been  laid,  upon  any  real  estate  now  in  said  city,  shall 
continue  to  be,  until  paid,  a  lien  thereon,  and  shall  be  pre- 
ferred in  payment  to  all  other  charges.  No  assessments  for 
any  local  improvements  shall  be  deemed  to  be  fully  confirmed, 
so  as  to  be  due  and  be  a  lien  ufKDn  the  property  included  in  the 
assessment,  until  ten  days  after  the  title  thereof,  with  the  date 
of  confirmation  shall  be  entered  with  the  date  of  such  entry, 
in  a  record  of  the  titles  of  assessments  confirmed,  to  be  kept 
in  the  office  of  the  collector  of  assessments  and  arrears. 

The  words  "  water  rents  '*  whenever  they  are  used  in 
this  title  shall  include,  "  water  rents,  water  rates,  expenses  of 
meters  their  connections  and  setting  and  lawful  charges  for 
the  supply  of  water  measured  by  meters." 

§  7.  Section  ten  hundred  and  twenty  of  the  Greater  New 
York  Charter  is  hereby  amended  so  as  to  read  as  follows : 

Rate. 

§  1020.  Interest  shall  hereafter  be  charged  and  collected 
at  the  rate  of  seven  per  centum  per  annum  on  all  arrears  of 
taxes  and  assessments  returned  to  the  collector  of  assessments 
and  arrears  from  the  time  they  become  due  [until  the  date  of 
payment,  or  in  case  a  sale  has  taken  place,  as  provided  in 
section  ten  hundred  and  twenty-seven  until  the  date  of  the 
certificate  mentioned  in  said  section]  and  on  the  water  rents 
and    [charges    for    water]    penalties    thereon    from    the    time 


./ 


19 

the  taxes  become  due,  to  which  they  may  be  added  [as  re- 
quired by  section  ten  hundred  and  twenty-five  until  the  same 
date  respectively]   until  the  date  of  payment,  or   until   the 

amount  thereof  is  advanced  to  the  city  by  the  purchaser  of 
the  tax  lien  for  such  item. 

§  8.  Section  ten  hundred  and  twenty-one  of  said  law  is  hereby 
amended  so  as  to  read  as  follows : 

Apportionment  of  Assessment. 
§  1021.  If  a  sum  of  money  in  gross  has  been  or  shall  be 
assessed  for  local  improvements,  upon  any  lands  or  premises 
in  The  City  of  New  York,  any  person  or  persons  claiming  any 
divided  or  undivided  part  thereof  may  pay  such  part  of  the 
sums  of  money  so  assessed,  also  of  the  interest  and  charges 
due  or  charged  thereon,  as  the  comptroller  may  deem  to  be 
just  and  equitable.  The  board  of  assessors  shall  apportion  the 
assessed  valuation  of  such  lands  or  premises  when  requested 
by  the  comptroller  so  to  do,  and  shall  certify  such  apportion- 
ment to  him.  The  determination  of  the  said  comptroller  shall 
be  based  upon  such  apportionment  so  certified,  [and]  The  re- 
mainder of  the  sum  of  money  so  assessed,  together  with  the 
interest  and  charges,  shall  be  a  lien  upon  the  residue  of  the 
land  and  premises  only,  upon  which  residue  the  tax  lien  may 
be  sold  in  pursuance  of  the  provisions  of  this  act,  to  satisfy 
the  residue  of  such  assessment,  interest,  or  charges,  in  the 
same  manner  as  though  the  residue  of  said  assessment  had 
been  imposed  upon  the  residue  of  said  land  or  premises. 

§  9.     Section  ten  hundred  and  twent>'-three  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Receiver  of  Taxes  to  Return  Arrears  to  the  Collector. 
§  1023.  The  receiver  of  taxes  shall,  on  the  first  day  of 
June,  in  each  year,  make  a  return  to  the  collector  of  assess- 
ments and  arrears,  of  all  taxes  on  real  estate  and  of  water 
[rates  and]  rents,  which  have  been  added  thereto,  remaining 


f 


fl 


20 

unpaid,  and  shall  notify  the  comptroller  of  the  aggregate 
amount  of  arrears  so  returned,  and  balance  on  his  books  the 
accounts  of  the  arrears  so  returned,  by  charging  the  amount 
thereof  to  the  said  collector,  and  shall  thereafter  receive  no 
payments  on  accounts  of  arrears  so  returned,  but  may  never- 
theless certify  to  the  collector  of  assessments  and  arrears  any 
errors,  which  shall,  upon  such  certificate,  be  corrected  by  the 
said  collector  any  time  before  settlement. 

§  ID.  Section  ten  hundred  and  twenty-four  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Water  Rents  to  be  Provided  for  in  Assessment  Rolls. 

§  1024.  There  shall  be  ruled  in  the  yearly  assessment  rolls 
of  each  section  or  ward  a  column  headed  "  water  rents  "  in 
which  immediately  after  the  confirmation  of  such  assessment 
Tolls,  the  collector  of  assessments  and  arrears  shall  cause  to 
be  entered  opposite  the  ward,  lot,  town  block  and  map  num- 
bers of  the  property  on  which  the  said  arrears  may  be  due, 
the  amounts  due  for  "  water  rents  "  expenses  of  meters,  their 
connections  and  setting,  water  rates  and  other  lawful  charges 
for  the  supply  of  water  measured  by  meters,  as  transmitted  to 
him  by  the  commissioner  of  water  supply,  gas  and  electricity, 
in  accordance  with  the  law,  and  the  same  shall  be  collected  at 
the  same  time  and  in  the  same  manner  with  the  taxes  to  which 
they  shall  be, added. 

§  II.  Section  ten  hundred  and  twenty-five  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Arrears  Likewise  to  be  Provided  For. 
§  1025.  There  shall  be  ruled  in  the  yearly  asssessment 
rolls  of  the  taxes  in  each  section  or  ward,  a  column  headed 
"arrears,"  in  which  the  collector  of  assessments  and  arrears 
shall  annually,  before  any  taxes  for  the  year  are  collected, 
cause  to  be  entered  the  word  "  arrears  "  [or  "  sold,"  according 
as  the  fact  may  be,]  opposite  to  the  ward,  lot,  town  block  and 
map*  numbers  on  which  any  arrears  of  taxes,  or  of  taxes  with 


the  water  rent  added,  shall  be  due,  or  on  which  any  assessment 
shall  remain  unpaid  which  was  due,  or  confirmed  one  month 
prior  to  the  first  of  June,  then  last  past,  [or  which  may  have 
been  sold  for  assessments,  taxes  or  water  rents,  and  yet  be 
redeemablej. 

§  12.     Section  ten  hundred  and  twenty-six  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 


Bills  for  Taxes  to  Show  Arrears. 

§  1026.  There  shall  be  ruled  a  column  for  "  arrears  "  in 
every  bill  rendered  for  taxes  for  lots  on  which  said  arrears  or 
assessments,  or  taxes  with  water  rents  added,  may  be  due, 
as  aforesaid,  [or  may  have  been  sold  and  yet  be  redeemable,] 
in  which  shall  be  written  opposite  the  entry  of  the  ward,  lot, 
town  block  and  map  number  of  said  lot,  "  arrears  "  with  the 
date  when  such  arrears  or  any  part  thereof  first  accrued ; 
[or  "  sold,"  according  as  the  fact  may  be ;]  and  at  the  bottom 
of  said  bill  shall  be  printed :  "  Whenever  any  tax  or  assess- 
ment shall  remain  unpaid  for  three  years  or  any  rent  for 
water  for  four  years  the  tax  lien  on  the  property  will  be  sold 
to  satisfy  such  arrears  of  taxes,  assessments  or  water  rents." 
["the  columns  for  arrears  indicate  lots  sold  for  arrears,  or  to 
be  sold  therefor;  arrears  to  be  paid  and  lots  redeemed  at  the 
office  of  the  collector  of  assessments  and  arrears."] 

§  13.  Section  ten  hundred  and  twenty-seven  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Sales  of  [Lands]  Tax  Liens  for  Taxes  and  Assessments: 

Proceedings. 

§  1027.  The  right  of  the  city  to  receive  taxes,  assessments 
and  water  rents  and  the  lien  thereof,  may  be  sold  by  the  city 
as  provided  in  this  title  and  shall  be  transferred  after  such 
sale,  in  the  manner  provided  by  this  title.  The  right  and 
lien  so  sold  shall  be  called  "  tax  lien  "  and  the  instrument  bv 


I 


which  it  is  assigned  shall  be  called  "  transfer  of  tax  lien." 
Whenever  any  tax  on  lands  or  tenements,  or  any  assessments 
on  lands  or  tenements  for  local  improvements,  shall  remain 
unpaid  for  the  term  of  three  years  from  the  time  the  same 
shall  have  been  confirmed,  and  also  whenever  any  [rents  forj 
water  rents  in  said  city  shall  have  been  due  and  unpaid  for 
the  term  of  four  years  from  the  time  the  same  shall  have  been 
due,  it  shall  and  may  be  lawful,  for  the  collector  of  assessments 
and  arrears,  under  the  direction  of  the  comptroller,  to  adver- 
tise the  tax  liens  on  the  said  lands  and  tenements  or  any  of 
them  for  sale,  and  by  such  advertisement  the  owner  or  owners 
of  such  lands  and  tenements  respectively  shall  be  required  to 
pay  the  amount  of  such  tax,  assessment  or  water  rent  with 
the  said  penalties  thereon  so  remaining  unpaid,  together  with 
the  interest  thereon  at  the  rate  of  seven  per  centum  per 
annum  to  the  time  of  payment,  with  the  charges  of  such 
notice  and  advertisement,  to  the  said  collector,  and  notice 
shall  be  given  by  such  advertisement  that  if  default  shall  be 
made  in  such  payment  the  tax  lien  on  such  lands  and  tene- 
ments will  be  sold  at  public  auction  at  a  day  and  place  therein 
to  be  specified,  for  the  lowest  rate  of  interest,  not  exceeding 
twelve  per  centum  per  annum,  [term  of  yearsj  at  which  any 

person  or  persons  shall  oflFer  to  take  the  same  in  consideration 
of  advancing  the  said   tax,   assessment  [or]   and  water  rents 

and  penalties  as  the  case  may  be,  [andj  the  interest  thereon 

as  aforesaid  to  the  time  of  sale,  [andJ  the  charges  of  the  above 
mentioned  notices  and  advertisement  and  all  other  costs  and 
charges  accrued  thereon ;  and  if,  notwithstanding  such  notice, 
the  owner  or  owners  shall  refuse  or  neglect  to  pay  such  tax, 
assessment,  or  water  rents  and  penalties  with  the  interests  as 
aforesaid,  and  the  charges  attending  such  notice  and  adver- 
tisement, then  it  shall  and  may  be  lawful  for  the  said  collector, 
under  the  direction  of  the  said  comptroller,  to  cause  the  tax 
lien  on  such  lands  and  tenements  to  be  sold  at  public  auction 
[for  a  term  of  years],    for   the   purpose  and   in  the  manner 


li 


23 


expressed  in  the  said  advertisement,  and  such  sale  shall  be 
made  on  the  day  and  at  the  place  for  that  purpose  mentioned  in 
the  said  advertisement,  and  shall  be  continued  from  time  to 
time,  if  necessary,  until  all  the  tax  liens  on  the  lands  and 
tenements  so  advertised  shall  be  sold  [and  the  said  collector 
shall  give  to  the  purchaser  or  purchasers  of  any  such  lands 
and  tenements  a  certificate  of  sale,  in  writing,  describing  the 
lands  and  tenements  so  purchased,  the  term  of  years  for 
which  the  same  shall  have  been  sold,  the  sum  paid  therefor, 
and  the  time  when  the  purchaser  will  be  entitled  to  a  lease  of 
the  said  lands  and   tenements].     But  [no]   the  tax  lien  on 

houses  or  lots,  or  improved  or  unimproved  lands,  in  the  City 
of  New  York,  shall  not  be  hereafter  sold  [or  leased]  at  public 

auction  for  the  non-payment  of  any  tax,  assessment,  or  water 
rents  which  may  be  due  thereon,  unless  notice  of  such  sale 
shall  have  been  published  once  in  each  week  successively  for 
three  months  in  the  City  Record  and  the  corporation  news- 
papers, which  advertisement  shall  contain,  appended  to  said 
notice  a  particular  and  detailed  statement  of  the  property  on 
which  the  tax  lien  is  to  be  sold  for  taxes,  assessments  or  water 
rents,  and  a  statement  of  the  taxes,  assessments  and  water 
rents,  accrued  subsequent  to  the  items  for  which  the  tax  lien 
is  to  be  sold  and  to  which  the  tax  lien  advertised  for  sale  will 
be  subject  or  the  said  detailed  statement  and  description, 
instead  of  being  published  in  the  City  Record  and  the  cor- 
poration newspapers,  shall,  at  the  option  of  the  said  comp- 
troller, be  printed  in  a  pamphlet,  in  which  case  copies  of  the 
pamphlet  shall  be  deposited  in  the  office  of  the  said  collector, 
and  shall  be  delivered  to  any  person  applying  therefor.  And 
the  notice  provided  for  in  this  section  to  be  given  of  the  sale 
of  tax  liens  on  houses  and  lots  and  improved  and  unimproved 
lands  shall  also  state  that  the  detailed  statement  of  the  taxes, 
assessments,  or  water  rents,  and  [the  ownership  of]  the 
property   [taxes]    taxed,   assessed,   [and]   or  on   which    the 

water  rents  are  unpaid,  and  the  liens  subsequently  accrued,  to 


i 


24 

which  the  tax  lien  advertised  for  sale  will  be  subject  is  pub- 
lished in  the  City  Record  and  the  corporation  newspapers,  or 
in  a  pamphlet,  as  the  case  may  be,  and  that  copies  of  the 
pamphlet  are  deposited  in  the  office  of  the  said  collector,  and 
will  be  delivered  to  any  person  applying  for  the  same.  No 
other  notice  or  demand  of  the  tax,  assessment,  or  water  rent 
shall  be  required  to  authorize  the  sale  of  tax  liens  on  any 
lands  and  tenements  as  hereinbefore  provided. 

§  14.  Section  ten  hundred  and  twenty-eight  of  said  law  is 
hereby  repealed. 

§  15.  Section  ten  hundred  and  twenty-nine  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  twenty- 
eight  and  is  amended  so  as  to  read  as  follows : 

Postponement  of  Sales. 

§  1028.  It  shall  be  lawful  for  the  comptroller  to  suspend 
or  postpone  any  sale  or  sales  of  tax  liens  on  lands  and  tene- 
ments or  any  portion  thereof  which  shall  have  been  adver- 
tised for  sale,  to  any  time  not  exceeding  fifteen  months  from 
the  day  specified  in  any  such  advertisement.  All  sales  which 
shall  be  so  postponed  or  suspended  shall  be  made  without 
further  advertisement,  other  than  a  general  notice  of  such 
postponement,  to  be  published  in  the  City  Record  and  the 
corporation  newspapers. 

§  16.  Section  ten  hundred  and  thirty  of  said  law  is  hereby 
renumbered  so  as  to  be  section  ten  hundred  and  twenty-nine  and 
is  amended  so  as  to  read  as  follows : 

SALES  [FOR  TAXES  AND  ASSESSIMENTS] 
OF  TAX  LIENS  TO  BE  CONDUCTED  BY 
THE  COLLECTOR  OF  ASSESSMENTS  AND 
ARREARS  [:  PROVISION  FOR  REPAYMENT 
OF  PURCHASE  MONEY  WHEN  THE  SALE  IS 
VACATED]. 


25 

§  1029.  The  collector  of  assessments  and  arrears  or  his 
assistant  shall  conduct  the  sales  hereinbefore  provided  to  be 
made,  and  no  auctioneer  other  than  said  collector  or  his 
assistant  shall  be  employed  to  make  such  sale,  and  no  auc- 
tioneers' fees  shall  be  charged  thereon.  The  comptroller  shall 
require  from  each  purchaser  of  a  tax  lien  at  the  time  of  the 
sale  a  payment  or  deposit  on  account  of  the  amount  of  the 
tax  lien  purchased  by  him,  and  shall  prescribe  a  time  not  later 
than  thirty  days  from  the  date  of  sale,  when  the  balance  shall 
be  paid  to  the  collector  of  assessments  and  arrears,  at  his 
office.    Transfers  of  tax  lien  [certificates  of  salej  shall  be  made 

and  delivered  to  the  purchaser  without  charge  upon  payment 
of  the  amounts  therein  shown  to  be  due.  [And  all  certificate 
of  sale  not  paid  for  within  thirty  days  following  the  date  of 
sale,  may  be  canceled  by  the  collector  of  assessments  and 
arrears  and  the  sales  relating  thereto  declared  void.  In  case 
any  sale  shall  be  vacated  or  canceled,  the  purchaser,  his  legal 
representative  or  assign,  shall  be  repaid  the  amount  paid  by 
him  at  such  sale,  with  interest  thereon  from  the  time  of  such 
payment.]     In  case  any  purchaser  do  not  complete  his  pur- 

chase  in  accordance  with  the  terms  prescribed  as  herein  pro- 
vided, then  the  amount  paid  by  him  at  the  time  of  the  sale 
shall  be  forfeited  to  the  city,  and  the  tax  lien  upon  the  lands 
affected  by  such  purchase  shall  be  sold  ag^in.  Such  resale 
shall  be  held  at  such  time  as  the  comptroller  may  direct  and 
shall  be  advertised  in  the  City  Record  and  the  corporation 
newspapers,  in  such  manner  and  for  such  time,  not  less  than 
two  weeks,  as  the  comptroller  may  direct.  The  amounts  of 
deposits  forfeited  as  aforesaid  shall  be  paid  into  the  General 
Fund  of  the  City  of  New  York. 

§  17.  Sections  ten  hundred  and  thirty-one  to  ten  hundred  and 
forty-nine  of  said  law  are  hereby  repealed. 


I  f 


§  1 8.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  thirty,  and  to  read  as 
follows :  , 

Transfers  of  Tax  Liens. 

§  1030.  A  transfer  of  tax  lien  shall  operate  to  transfer  and 
assign  to  the  purchaser  the  tax  lien  upon  the  lands  or  tene- 
ments described  therein  for  the  taxes,  assessments  and  water 
rents,  and  penalties,  the  interest  thereon,  and  the  charges  of 
the  notices  and  advertisement  given  pursuant  to  section  ten 
hundred  and  twenty-seven  of  this  act,  and  all  other  costs  and 
charges,  which  have  been  advertised  for  sale  as  provided  in  said 
section  ten  hundred  and  twenty-seven,  free  of  all  taxes, 
assessments  and  water  rents  which  became  a  lien  prior 
to  the  time  when  the  latest  item  of  such  tax  lien  became  a 
lien,  but  subject  to  the  lien  for  and  right  of  the  city  to  collect 
and  receive  all  taxes,  assessments  and  water  rents  which 
accrued  or  which  became  a  lien  after  such  latest  item  for 
which  sale  is  made,  became  a  lien,  and  which  were  mentioned 
in  the  advertisement  of  sale.  A  transfer  of  tax  lien  shall 
contain  a  transfer  and  assignment  by  the  city  to  the  pur- 
chaser of  the  tax  lien  sold  to  the  purchaser,  the  date  of  the 
sale,  the  aggregate  amount  of  the  tax  Hen  so  transferred,  and 
the  items  of  taxes,  assessments,  water  rents,  penalties,  and 
interest  of  which  it  is  composed,  the  annual  rate  of  interest 
which  the  purchaser  has  bid  and  will  be  entitled  to  receive,  the 
date  when  the  amount  of  the  tax  lien  will  be  due,  and  a 
description  of  the  real  property  affected  by  the  lien,  which 
description  shall  include  the  name  of  the  borough  in  which 
the  property  lies  and  shall  refer  for  certainty  to  the  designa- 
tion of  said  lot  on  the  tax  map,  by  its  lot  number  and  the 
number  of  the  block,  ward  or  section  in  which  it  is  contained, 
and  such  other  identifying  description  as  the  collector  of 
assessments  and  arrears  may  deem  proper  to  add.  Each 
transfer  of  tax  lien  shall  be  subscribed  by  the  collector  of 
assessments  and  arrears,  making  the  sale  or  a  successor  in 


n 


office  of  such  collector,  and  shall  be  acknowledged  by  the 
officer  subscribing  the  same  in  the  manner  in  which  a  deed 
is  required  to  be  acknowledged  to  be  recorded  in  the  county 
in  which  the  real  property  affected  is  situated. 

§  19.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section  to  be  section  ten  hundred  and  thirty-one  and  to  read 
as  follows: 

Record  of  Transfers  of  Tax  Liens. 

§  103 1.  The  collector  of  assessments  and  arrears  shall 
keep  in  his  office  a  record  of  sales  of  tax  liens,  and  a  copy  of 
each  transfer  of  tax  lien  issued  by  him,  which  records  shall 
be  public  records.  A  transfer  of  tax  lien  and  any  assignment 
thereof  duly  acknowledged,  shall  be  deemed  conveyances 
under  the  Real  Property  Law,  and  may  be  recorded  in  the 
office  of  the  recording  officer  of  any  county  in  which  the  real 
property  which  it  affects  is  situated.  The  record  of  sales 
of  tax  liens  in  the  office  of  the  collector  of  assessments  and 
arrears,  a  transfer  of  tax  lien,  a  copy  of  a  transfer  tax  lien 
kept  in  the  office  of  the  collector  of  assessments  and  arrears 
as  herein  provided,  a  record  of  a  transfer  tax  lien  in  the  office 
of  a  recording  officer,  and  an  assignment  of  tax  lien  duly 
acknowledged  or  the  record  thereof  in  the  office  of  a  recording 
officer,  shall  each  be  evidence  in  any  court  in  the  state  without 
further  proof.  A  transcript  of  any  record  enumerated  in  this 
section,  duly  certified  shall  be  evidence  in  any  court  in  the 
state  with  like  effect  as  the  original  instrument  of  record. 
Neither  the  tax  lien  nor  the  rights  transferred  by  a  transfer  tax 
lien  shall  be  impaired  by  failure  to  record  the  transfer  of  tax 
lien  in  the  office  of  a  recording  officer. 

§  20.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-two,  and  to  read 
as  follows: 


.11 


N? 


29 


Rights  of  Purchaser  of  Tax  Lien. 

§  1032.  The  aggregate  amount  of  each  tax  lien  trans- 
ferred pursuant  to  this  title,  shall  be  due  three  years  from  the 
date  of  the  sale.  Until  such  aggregate  amount  is  fully  paid 
and  discharged,  the  holder  of  the  transfer  of  tax  lien  shall  be 
entitled  to  receive  interest  on  such  aggregate  amount  semi- 
annually on  the  first  day  of  January  and  July,  at  the  rate 
which  the  purchaser  shall  have  bid.  At  the  option  of  the 
holder  of  any  transfer  of  tax  lien  the  aggregate  amount  thereof 
shall  become  due  after  default  in  the  payment  of  interest  for 
thirty  days  or  after  default  for  six  months  after  the  delivery 
of  the  transfer  tax  lien  in  the  payment  of  any  taxes,  assess- 
ments or  water  rents,  and  which  became  a  lien  after  the  sale  of 
the  tax  lien  or  after  the  latest  item  for  which  sale  is  made  and 
before  the  sale  of  the  tax  lien,  or  after  default  for  three  months 
in  the  payment  of  any  tax,  assessment  or  water  rent  affecting 
such  real  property  and  becoming  a  lien,  after  the  sale  of  the 
tax  lien.  Any  person  having  a  legal  or  beneficial  interest  in 
property  affected  by  a  transfer  of  tax  lien  may  discharge  the 
same  before  maturity  after  giving  thirty  days'  notice  in  writ- 
ing to  the  holder  thereof,  upon  payment  of  the  principal  with 
interest  at  the  rate  bid  to  the  next  succeeding  interest  day. 

§  21.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-three,  and  to 
read  as  follows: 

Discharge  of  Tax  Lien. 

§  1033.  A  tax  lien  sold  pursuant  to  the  provisions  of  this 
title  must  be  discharged  upon  the  record  thereof  by  the  col- 
lector of  assessments  and  arrears  when  the  transfer  of  tax 
lien  is  surrendered  to  him  for  cancellation  and  there  is  pre- 
sented to  him  a  certificate  executed  by  the  purchaser,  or  the 
personal  representative  or  assignee  of  the  purchaser,  acknowl- 
edged so  as  to  be  entitled  to  be  recorded  in  the  county  in 
which  the  real  property  affected  by  such  tax  lien  is  situated, 


certifying  that  the  tax  lien  has  been  paid  or  otherwise  sat- 
isfied and  discharged.  The  transfer  of  tax  lien  thus  surrendered 
and  the  certificate  of  discharge  must  be  filed  by  the  collector 
of  assessments  and  arrears  and  he  must  note  upon  the  margin 
of  the  record  of  such  sale  upon  such  transfer  of  tax  lien  and 
upon  the  copy  of  the  transfer  of  tax  lien  kept  in  his  office  a 
minute  of  such  discharge  and  the  date  of  filing  thereof.  If 
the  transfer  of  tax  lien  shall  have  been  lost  or  destroyed,  appli- 
cation may  be  made  for  an  order  dispensing  with  the  produc- 
tion of  the  transfer  of  tax  lien  in  the  same  manner  as  is  pro- 
vided in  section  two  hundred  and  seventy-a  of  the  Real  Property 
Law,  the  provisions  of  which  are  hereby  made  applicable  so  far  as 
the  same  may  be,  to  discharge  of  tax  liens.  The  collector  of 
assessments  and  arrears  shall  upon  demand  issue  his  certificate 
showing  the  discharge  of  any  tax  lien  which  may  have  been  duly 
discharged  as  provided  in  this  section,  and  such  certificates  may 
be  filed  in  any  office  where  the  transfer  of  tax  lien  is  recorded, 
and  any  recording  officer  with  whom  such  a  certificate  is  filed, 
shall  record  the  same,  and  note  upon  the  margin  of  the  record 
of  such  transfer  of  tax  lien  in  his  office  a  statement  that  the 
same  has  been  discharged  and  reference  to  the  record  of  such 
certificate  in  his  office. 

§  22.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-four,  and  to  read 
as  follows: 

Exemption  from  Taxation. 

§  1034.  Tax  liens  and  transfers  of  tax  liens  shall  be 
exempt  from  taxation  by  the  state  or  any  local  subdivisions 
thereof,  except  the  taxes  imposed  by  article  ten  of  the  tax 
law.  The  real  property  affected  by  any  tax  lien  shall  not  be 
exempt  from  taxation  by  reason  of  this  section. 

§  23.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-five,  and  to  read 
as  follows : 


t 


^ 
'f 


.1 


30 

Foreclosure  of  Tax  Lien. 

§  1035.  If  the  amount  of  any  tax  lien  which  shall  have 
been  transferred  by  a  transfer  of  tax  lien  shall  not  be  paid 
when  under  its  terms  and  the  provisions  of  this  title  such 
amount  shall  be  due,  it  shall  be  lawful  for  the  holder  of  such 
tax  lien  to  commence  an  action  in  the  Supreme  Court  to  fore- 
close such  tax  lien.  In  an  action  to  foreclose  a  tax  lien  any 
person  shall  be  a  proper  party  of  whom  the  plaintiff  alleges 
that  such  person  has  or  may  have  or  that  the  plaintiff  has 
reason  to  believe  that  such  person  has  or  may  have,  an  interest 
in  the  real  property  affected  by  the  tax  lien.  Except  as  it  is 
regulated  in  this  title  an  action  to  foreclose  a  tax  lien  shall 
be  regulated  by  the  provisions  of  the  Code  of  Civil  Procedure 
and  all  other  provisions  of  law,  and  rules  of  practice  applicable 
to  actions  to  foreclose  mortgages  on  real  property. 

§  24.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-six,  and  to  read 
as  follows: 

Pleading  Transfer  of  Tax  Lien. 

§  1036.  Where  a  cause  of  action,  defense  or  counter- 
claim, is  for  the  foreclosure  of  a  tax  lien,  or  is  in  any  manner 
founded  upon  a  tax  lien  or  a  transfer  of  tax  lien,  if  in  any 
pleading  or  petition  in  any  court,  there  be  set  forth  a  copy  of 
a  transfer  of  tax  lien,  together  with  a  statement  of  the  time 
and  place  of  the  recording  thereof  in  the  office  of  the  collector 
of  assessments  and  arrears  or  in  any  other  public  office,  it 
shall  not  be  necessary  to  plead  or  prove  any  act,  proceeding, 
notice  or  action  preceding  the  issue  of  such  transfer  of  tax 
sale,  nor  to  establish  the  validity  of  the  tax  lien  transferred 
by  such  transfer  of  tax  lien.  If  a  party  or  person  interested 
in  any  such  action  or  proceeding  claims  that  a  tax  lien  is  irreg- 
ular or  invalid,  or  that  there  is  any  defect  therein  or  that  a 
transfer  of  tax  is  irregular,  invalid  or  defective,  such  inval- 
idity, irregularity  or  defect  must  be  specifically  pleaded  or  set 


I 


I 


J   I 


31 

forth,  and  must  be  established  affirmatively  by  the  party  or 
person  pleading  or  setting  forth  the  same. 

§  25.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-seven,  and  to 
read  as  follows : 

Judgment  Upon  Tax  Lien. 

§  1037.  In  any  action  for  the  foreclosure  of  a  tax  lien, 
and  in  any  action  or  proceeding  in  which  a  cause  of  action, 
defense  or  counterclaim  is  in  any  manner  founded  upon  a  tax 
lien  or  a  transfer  of  tax  lien,  such  transfer  of  tax  lien  and  the 
tax  lien  which  it  transfers  shall  be  presumed  to  be  regular 
and  valid  and  effectual  to  transfer  to  the  purchaser  named 
therein  a  valid  and  enforcible  tax  lien.  Unless  in  such  an 
action  or  proceeding  such  tax  lien  or  transfer  of  tax  lien  be 
found  to  be  invalid  it  shall  be  lawful  in  any  interlocutory  or 
final  judgment,  or  any  final  order  entered,  in  any  such  action 
or  proceeding  to  adjudge  that  a  tax  lien  transferred  by  a 
transfer  of  tax  lien  pleaded  or  set  forth  as  provided  in  section 
ten  hundred  and  thirty-six,  or  a  tax  lien  established  or  proved  in 
any  other  manner  to  the  satisfaction  of  the  court,  is  a  valid  lien 
upon  the  real  property  which  it  purports  to  affect,  and  that  the 
transfer  of  tax  lien  transferring  the  same  is  effectual  to  transfer 
such  tax  lien  to  the  purchaser  named  therein. 

§  26.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-eight,  and  to 
read  as  follows : 

Judgment  of  Foreclosure  of  Tax  Lien. 
§  1038.  In  an  action  to  foreclose  a  tax  lien,  unless  the 
defendants  obtain  judgment,  the  plaintiff  shall  be  entitled  to 
a  judgment  establishing  the  validity  of  the  tax  lien  or  of  such 
items  thereof  as  are  not  adjudged  invalid  and  of  the  transfer 
of  tax  lien,  and  directing  the  sale  of  the  real  property  affected 
thereby,  or  such  part  thereof  as  is  sufficient  to  discharge  the 
tax  lien,  or  such  items  thereof  as  are  not  adjudged  invalid,  all 


I 


\ 


M 


32 

other  accrued  taxes,  assessments  and  water  rents  affecting 
the  real  property,  the  expenses  of  the  sale,  and  the  costs  of 
the  action. 

§  2^.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-nine,  and  to 
read  as  follows : 

Effect  of  Judgment  Foreclosing  Tax  Lien. 

§  1039.  Every  judgment  in  an  action  to  foreclose  a  tax 
lien  shall  be  binding  upon,  and  a  conveyance  upon  a  sale 
made  pursuant  to  a  final  judgment  to  foreclose  a  tax  lien,  shall 
transfer  to  and  vest  in  the  purchaser  all  the  right,  title,  interest 
and  estate  in  the  real  property  affected  by  the  tax  lien  of  the 
plaintiff,  each  defendant,  whether  individual  or  trustee,  upon 
whom  the  summons  is  served,  either  personally,  by  publica- 
tion, of  without  the  state,  each  person  claiming  from,  through 
or  under  such  a  defendant  by  title  accruing  after  the  filing  of 
notice  of  pendency  of  the  action  or  after  the  entry  of  judg- 
ment and  filing  of  the  judgment  roll  in  the  proper  county 
clerk's  office,  and  upon  each  person  not  in  being  when  the 
judgment  is  rendered,  who  afterwards  becomes  entitled  to  a 
beneficial  interest  attaching  to,  or  an  estate  or  interest  in  such 
real  property  or  any  portion  thereof,  provided  that  the  person 
first  entitled  to  such  beneficial  interest,  estate  or  interest  is 
a  party  to  such  action  or  bound  by  such  judgment.  So  much 
of  section  four  hundred  and  forty-five  of  the  Code  of  Civil  Pro- 
cedure as  requires  the  court  to  allow  a  defendant  to  defend  an 
action  after  final  judgment  shall  not  apply  to  an  action  to  fore- 
close a  tax  lien.  Delivery  of  the  possession  of  real  property 
affected  by  a  judgment  to  forclose  a  tax  lien  may  be  compelled  in 
the  manner  prescribed  in  section  sixteen  hundred  and  seventy-five 
of  the  Code  of  Civil  Procedure. 

§  28.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty,  and  to  read 
follows :  . 


i; 


33 

Surplus. 
§  1040.  If  there  is  any  surplus  of  the  proceeds  of  the  sale, 
after  paying  the  expenses  of  the  sale,  and  satisfying  the 
amount  of  the  tax  lien  and  interest  and  the  costs  of  the  action, 
it  must  be  paid  into  court,  for  the  use  of  the  person  or  persons 
entitled  thereto.  If  any  part  of  the  surplus  remains  in  court 
for  the  period  of  three  months,  the  court  must,  if  no  applica- 
tion has  been  made  therefor,  and  may,  if  an  application  there- 
for is  pending,  direct  it  to  be  invested  at  interest,  for  the  bene- 
fit of  the  person  or  persons  entitled  thereto,  to  be  paid  upon 
the  direction  of  the  court, 

§  29.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-one,  and  to  read 
as  follows: 

Foreclosed  Tax  Lien  Not  Arrears. 

§  1041.  The  purchaser  under  any  judgment  foreclosing  a 
tax  lien  may  give  notice  of  such  foreclosure  to  the  collector  of 
assessments  and  arrears,  and  after  such  notice  the  items  which 
constituted  the  tax  lien  thus  foreclosed  shall  not  be  entered 
by  the  collector  of  assessments  and  arrears  in  any  yearly 
assessment  roll,  so  long  as  the  judgment  of  foreclosure  of  such 
lien  remains  in  force. 

§  30.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-two,  and  to  read 
as  follows: 

Procedure  When  No  Bid  for  a  Tax  Lien  is  Received. 

§  1042.  If  no  bid  be  received  for  a  tax  lien  on  any  parcel 
of  property  at  a  duly  advertised  sale  and  it  appears  to  the 
comptroller  that  the  taxes,  assessments,  water  rents,  penalties 
and  accrued  interest  amount  to  so  large  a  proportion  of  the 
value  of  the  property  that  the  security  is  insufficient  to  attract 
bidders,  then  and  in  that  event  the  comptroller  and  the  cor- 
poration counsel  shall  investigate  the  facts  and  fix  a  lesser 
amount  for  which  in  their  judgment  a  tax  lien  bearing  twelve 


I 


\    '  ! 


}' 


34^ 


Im 


per  centum  interest  can  be  sold.  A  certificate  in  writing, 
signed  by  them,  shall  be  filed  with  the  collector  of  assessments 
and  arrears,  setting  forth  the  amount  so  determined  by  them, 
together  with  a  brief  statement  of  the  reasons  for  such  reduc- 
tion, which  certificate  shall  include  the  total  amount  of  the 
taxes,  assessments,  water  rents,  penalties  and  accrued  interest, 
the  assessed  value  of  such  parcel  of  real  estate,  and  the  value 
of  the  land  as  the  same  appears  on  the  last  preceding  assess- 
ment roll.  Thereafter  the  reduced  amount  so  determined  shall 
constitute  the  tax  lien  upon  said  real  property  for  the  items 
therein  enumerated,  which  amount  shall  bear  interest  at  the 
rate  of  seven  per  cent,  per  annum  from  the  date  of  such  cer- 
tificate until  fully  paid,  or  until  the  tax  lien  thus  fixed,  together 
with  the  lien  for  any  other  taxes,  assessments,  water  rents,  and 
penalties  and  interest  becoming  liens  thereafter  shall  be  sold. 
The  collector  of  assessments  and  arrears  shall  forthwith  adver- 
tise the  tax  lien  for  the  amount  so  determined  for  sale  to  the 
highest  bidder  in  the  manner  provided  for  the  advertisement 
for  the  sale  of  ordinary  tax  liens.  Such  tax  lien  shall  bear 
interest  at  twelve  per  centum  and  shall  be  sold  to  the  person 
who  shall  bid  the  highest  amount  of  money  in  excess  of  the 
reduced  amount  fixed  by  the  comptroller  and  corporation 
counsel  as  above  provided,  but  not  more  than  the  original 
amount  of  the  tax  lien  on  the  real  property  which  it  affects; 
when  the  bidding  reaches  such  amount,  it  shall  proceed  in  the 
manner  provided  in  section  ten  hundred  and  twenty-nine.  If  no 
bid  shall  be  received  at  such  sale,  the  comptroller  and  corporation 
counsel  shall  reconsider  their  determination  and  may  file  a  cer- 
tificate in  the  manner  heretofore  provided,  and  the  collector  of 
assessments  and  arrears  shall  proceed  again  as  heretofore  directed. 
Such  procedure  shall  be  repeated  until  a  tax  lien  for  such  taxes, 
assessments,  water  rents  and  accrued  interest  shall  be  sold. 


§  31.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-three,  and  to  read 
as  follows: 


35 


Reimbursement  for  Defective  Tax  Liens  or  Transfers  of 

Tax   Liens. 

§  1043.  li  3i  transfer  of  tax  lien  be  vacated  or  set  aside 
or  canceled,  or  it  be  adjudged  in  any  action  that  a  transfer  of 
tax  lien  is  invalid  or  defective,  or  not  sufficient  to  transfer  a 
tax  lien  to  the  purchaser  thereof,  or  if  in  any  action  to  fore- 
close a  tax  lien,  it  be  adjudged  that  the  entire  tax  lien  is  void 
and  not  a  valid  lien  on  the  premises  which  it  purports  to  affect, 
and  that  the  complaint  shall  be  dismissed,  the  purchaser  may 
surrender  such  transfer  of  tax  lien  to  the  collector  of  assess- 
ments and  arrears  and  shall  be  repaid  by  the  city  the  amount 
paid  for  such  transfer  of  tax  lien,  with  interest  from  the  time 
of  such  payment  at  the  rate  set  forth  in  the  transfer  of  tax 
lien,  and  the  city  shall  pay  the  taxed  costs  and  disbursements 
of  any  action  or  proceeding  in  which  such  adjudication  is 
made. 

§  32.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  forty-four,  and  to 
read  as  follows: 

Reimbursement  When  Part  of  Tax  Lien  Is  Defective. 

§  1044.  If,  in  any  action  to  foreclose  a  tax  lien,  it  be  ad- 
judged that  any,  but  not  all  of  the  items  constituting  such 
tax  lien  are  void  and  not  a  valid  lien  on  the  premises  which  such 
tax  lien  purports  to  aflFect,  or  if  in  any  action  or  proceeding  it 
be  adjudged  that  a  transfer  of  tax  lien  is  invalid  or  defective, 
as  to  any  but  not  as  to  all  of  the  items  transferred,  the  holder 
of  the  transfer  of  tax  lien  shall,  by  instrument  in  writing  duly 
acknowledged,  retransfer  to  the  city  the  items  thus  aflFected, 
and  shall  be  repaid  by  the  city  such  portion  of  the  amount  paid 
for  such  transfer  of  tax  lien  as  may  be  applicable  to  the  items 
thus  aflFected,  with  interest  from  the  time  of  such  payment  at 
the  rate  set  forth  in  the  transfer  of  tax  lien,  and  the  city  shall 
pay  the  taxed  costs  and  disbursements  of  any  action  or  pro- 
ceeding, other  than  an  action  to  foreclose  the  tax  lien,  in 
which  such  adjudication  is  made. 


2  I 


36 


§  33-  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  forty-five,  and  to  read 
as  follows: 

Owners  May  Question  Transfers  of  Tax  Liens. 
§   I045-     Any   person   interested   in  or  holding  a   lien   upon 
any  real  property  affected  by  any  transfer  of  tax  lien,  may 
file  a  written  notice  with  the  collector  of  assessments  and 
arrears  claiming  that  a  transfer  of  tax  lien    is    invalid    or 
defective  or  that  a  tax  lien  which  has  been  transferred  pur- 
suant to  this  title  or  which  is  advertised  to  be  transferred 
is  invalid,  defective,  void  or  ineflFectual,  or  should  be  vacated 
or  set  aside.    The  collector  of  assessments  and  arrears  shall 
transmit  all  such  notices  to  the  corporation  counsel,  who  shall 
examine  into  the  facts  and  proceedings  resulting  in  the  tax 
lien  or  transfer  of  tax  lien  mentioned  in  such  notice ;  before  a 
determination  is  had  the  corporation  counsel  shall  serve  a  copy 
of  such  notice  upon  the  holder  of  the  transfer  of  tax  lien  which 
is  thus  questioned  or  which  transfers  the  items  thus  questioned 
and  shall  give  such  holder  an  opportunity  to  be  heard.    The 
corporation  counsel  shall  certify  in  writing  his  opinion  upon 
the  matters  and  questions  raised  by  such  notice,  and  if  he  con- 
cludes that  a  defense  in  an  action  to  foreclose  the  tax  lien 
would  succeed  in  whole  or  in  part  he  shall  so  certify,  and  shall 
recommend  what  action  shall  be  taken  by  the  city  concerning 
the  same.    If  the  corporation  counsel  concludes  that  such  de- 
fense would  succeed  in  whole  or  in  part  and  recommends  re- 
payment by  the  city  of  the  amount  paid  for  a  transfer  of  tax 
lien  as  would  be  applicable  to  any  item,  he  shall  state  the 
reasons  for  such  recommendation,  and  if  it  be  approved  by 
the  mayor  and  comptroller  the  city  shall  require  the  surrender 
of  the  transfer  of  tax  lien  or  the  retransfer  to  it  of  the  item  or 
items  of  tax  lien  which  are  found  to  be  void  or  defective,  and 
shall  make  repayment  therefor  in  the  same  manner  as  if  such 
transfer  or  tax  lien,  tax  lien  or  items  had  been  adjudicated 
upon  in  the  manner  provided  in  sections  ten  hundred  and  forty- 
three  and  ten  hundred  and  forty-four. 


Zf 


r     §  34.    The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-six,  and  to  read 
as  follows: 
Corporation  Counsel  to  Protect  Interest  of  City. 

§  1046.     No  claim   shall   be   made   against  the   city   under 
sections  ten  hundred  and  forty-three,  ten  hundred  and  forty-four 
or  ten  hundred  and  forty-five,  unless  action  to  foreclose  the  tax 
Hen  or  transfer  of  tax  lien  upon  which  such  claim  is  founded 
be  commenced  within  five  years  from  the  time  of  the  sale 
resulting  in  such  transfer  of  tax  lien ;  nor  shall  any  claim  be 
made  against  the  city  under  sections  ten  hundred  and  forty-three 
or  ten  hundred  and  forty-four,  unless  within  ten  days  after  the 
commencement  of  any  action  or  proceeding  to  vacate,  set  aside  or 
cancel  a  transfer  of  tax  lien,  or  a  tax  lien  or  an  item  mentioned  in 
a  transfer  of  tax  lien,  or  unless  within  ten  days  after  the  service 
of  any  pleading  or  other  paper  in  an  action  or  proceeding  in  which 
any  transfer  of  tax  lien,  or  item  mentioned  in  a  transfer  of  tax 
lien,  is  brought  into  question,  sought  to  be  set  aside,  vacated, 
or  canceled,  or  which  sets  forth  or  pleads  any  defense  to  an 
action  to  foreclose  a  tax  lien,  a  notice  in  writing  be  served 
upon  the  corporation  counsel  setting  forth  the  question  or 
objection  raised  to  the  best  knowledge  of  the  holder  of  the 
transfer  of  tax  lien,  or  his  attorney  at  law,  and  demanding 
that  the  city  take  up  the  prosecution  or  defense  of  the  action 
or  proceeding.    All  proceedings  in  such  action  or  proceeding 
shall  be  stayed  for  thirty  days  or  such  shorter  time  as  the 
corporation  counsel  shall  stipulate  in  writing.    It  shall  be  the 
duty  of  the  corporation  counsel    to    examine    the    questions 
raised,  and  he  shall  have  the  right,  in  order  to  protect  the 
interests  of  the  city,  to  be  substituted  for  the  attorney  of 
record  of  the  holder  of  the  transfer  tax  lien,  or  to  appear  as 
attorney  of  record  for  the  holder  of  any  such  transfer  of  tax 
lien,  to  conduct  or  defend  any  such  action  or  proceeding  in  the 
name  of  the  holder  of  the  transfer  of  tax  lien,  and  to  bring  any 
other  action  or  proceeding  for,  on  behalf  of  and  in  the  name  of 


Mi 


^f 


» 


!  • 


38 

the  holder  of  such  transfer  of  tax  lien  as  he  may  deem 
advisable,  to  take  appeals,  and  to  argue  appeals  taken  by  the 
adverse  party,  as  he  may  deem  advisable.  It  shall  be  the  duty 
of  the  corporation  counsel  to  protect  the  interest  of  the  city 
in  all  matters,  actions  and  proceedings  relating  to  tax  liens 
and  transfers  of  tax  liens ;  to  intervene  on  behalf  of  the  city 
or  of  the  holder  of  a  transfer  of  tax  lien  in,  or  make  the  city 
a  party  to  any  action  in  which  he  believes  it  to  be  to  the 
interest  of  the  city  so  to  do,  by  reason  of  any  matter  arising 
under  or  relating  to  any  tax  lien  or  transfer  of  tax  lien,  or 
advertisement  of  sale  of  tax  liens. 


i 


§  35.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-seven,  and  to  read 
as  follows : 

Defective  or  Invalid  Transfer  of  Tax  Lien  ;  Proceeding 

Anew. 

§  1047.  If  a  transfer  of  tax  lien  be  vacated  or  set  aside  or 
canceled  or  it  be  adjudged  in  any  action  that  a  transfer  of  tax 
lien  is  invalid  or  defective,  or  not  sufficient  to  transfer  a  tax 
lien  to  the  purchaser  thereof,  or  if  in  any  action  to  foreclose  a 
tax  lien,  it  be  adjudged  that  a  tax  lien  is  not  a  valid  lien  on  the 
premises  which  it  purports  to  affect,  because  of  some  irregu- 
larity in  the  proceedings  had,  and  if,  in  pursuance  of  such 
adjudication  the  purchaser  of  said  transfer  of  tax  lien  shall 
have  surrendered  such  transfer  of  tax  lien  to  the  collector  of 
assessments  and  arrears  and  shall  have  been  repaid  by  the 
city,  the  amount  paid  for  such  transfer  of  tax  lien,  with  in- 
terest and  costs  and  disbursements  of  the  said  action  or  pro- 
ceeding in  which  such  adjudication  was  made,  then  and  in 
that  event,  the  tax  lien  which  was  purported  to  be  transferred 
and  assigned  in  such  transfer  of  tax  lien  shall  remain  as  a 
valid  lien  upon  the  premises  which  it  affects,  except  to  such 
extent  as  it  may  have  been  adjudged  irregular  or  invalid,  and 
the  collector  of  assessments  and  arrears  shall  proceed  to  sell 


39 


the  said  tax  lien  anew,  as  provided  in  section  ten  hundred  and 
twenty-seven  of  this  act,  as  if  no  prior  sale  purporting  to  transfer 
the  said  tax  lien  had  taken  place. 

§  36.  Section  ten  hundred  and  fifty  of  said  law  is  hereby 
renumbered  so  as  to  be  section  ten  hundred  and  forty-eight, 
and  amended  so  as  to  read  as  follows : 

Lost  [Certificate J  Transfer  of  Tax  Lien  :    Delivery  or 
[Lease]  Duplicate  in  Case  Of. 

§  1048.  Whenever  any  [certificate]  transfer  of  tax  lien 
given  by  the  collector  of  assessments  and  arrears,  as  in  this 
title  provided,  [of  land  sold]  shall  be  lost,  the  [said]  comp- 
troller may  receive  evidence  of  such  loss,  and  on  satisfactory 
proof  of  the  fact  may  direct  the  collector  of  assessments  and 
arrears  to  execute  and  deliver  a  [lease]  duplicate  to  such  per- 
son or  persons  who  shall  appear  entitled  thereto  [of  the  lands 
and  tenements  described  in  the  certificate],  and  may  also,  in 
his  discretion,  require  a  bond  of  indemnity,  to  The  City  of 
New  York.  [Each  certificate  shall  be  registered  in  the  record 
of  sales  to  be  kept  in  the  bureau  of  said  collector  of  assess- 
ments and  arrears,  and  no  transfer  of  such  certificate  shall  be 
valid  until  registered  in  said  book.] 

§  37.  Section  ten  hundred  and  fifty-one  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  forty- 
nine,  and  amended  so  as  to  read  ts  follows : 

Bills  of  Arrears  of  Taxes  and  Assessments  to  be  Fur- 
nished When  Requested. 

§  1049.  The  collector  of  assessments  and  arrears,  upon 
the  requisition  of  any  person,  shall  furnish  a  bill  of  all  arrears 
of  taxes,  and  of  taxes  with  the  "  water  rents  "  added  on  any 
lot  or  lots  due  prior  to  the  first  of  June,  then  last  past,  and  of 
assessments  which  are  due  and  payable  [including  the  amount 
necessary  to  redeem  it  or  them,  if  it  or  they  have  been  sold 


I 


r 


LI 


►  • 


40 

for  any  arrears  of  assessments,  taxes  or  water  rents  and  be 
yet  redeemable  J ;  and  upon  the  payment  of  the  said  bill  (which 
shall  be  called  a  "  bill  of  arrears  and  assessments,  taxes  and 
water  rents,")  [and  for  redemption  J  his  receipt  thereon, 
countersigned  by  the  comptroller,  shall  be  conclusive  evidence 
of  such  payment.  The  comptroller  shall  cause  to  be  kept  a 
duplicate  account  of  amounts  so  collected,  and  the  certificate 
of  the  collector  of  assessments  and  arrears,  countersigned  by 
the  comptroller,  that  there  are  no  such  liens  on  said  lot  or 
lots,  shall  forever  free  the  said  lots  from  all  liens  of  taxes  or 
for  taxes  with  water  rates  added,  or  for  rents  of  water  added 
to  the  taxes  prior  to  the  first  of  June  then  last  past,  and  for 
all  assessments  due  and  payable  prior  to  the  date  of  the  said 
receipt  or  certificate,  not  including,  however,  the  lien  of  any  tax 
lien  duly  sold  [and  from  all  liens  in  consequence  of  sales  for 
assessments,  taxes,  or  water  rents,  or  for  all  of  them,  when 
the  time  allowed  by  law  for  redemption  had  not  expired  at  the 
date  or  time  of  said  payment  or  certificate  J. 

§  38.  Section  ten  hundred  and  fifty-two  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  fifty. 

§  39.  Section  ten  hundred  and  fifty-three  of  said  law  is 
hereby  repealed. 

§  40.  Section  ten  hundred  and  fifty-four  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  fifty- 
one. 

§  41.  This  act  shall  not  aflFect  or  impair  any  act  done  or 
right  accruing,  accrued  or  acquired,  nor  any  penalty  or  for- 
feiture incurred  prior  to  the  time  when  this  act  takes  effect, 
by  virtue  of  any  section  of  the  Greater  New  York  Charter 
repealed,  amended  or  modified  by  this  act;  but  such  right, 
penalty,  or  forfeiture,  may  be  asserted,  enforced,  prosecuted 
or  inflicted  as  fully  and  to  the  same  extent  as  if  this  act  had 
not  been  passed  or  said  sections  had  not  been  amended, 
repealed  or  modified;  no  tax  lease  heretofore  issued  nor  any 


1i 


tax  sale  heretofore  made  shall  be  affected  by  this  act,  but  the 
rights  of  all  persons,  with  respect  thereto,  shall  be  the  same 
as  if  this  act  had  not  been  passed,  and  all  actions,  suits,  pro- 
ceedings or  prosecutions  under  the  sections  of  Title  5  of 
Chapter  XVII.  of  the  Greater  New  York  Charter  hereby 
amended,  repealed  or  modified  and  pending  when  this  act 
takes  effect  may  be  prosecuted  and  defended  to  final  effect  in 
the  same  manner  as  they  might  prior  to  the  time  when  this 
act  takes  effect. 

§  42.    This  act  shall  take  effect  January  first,  1909. 


t 
I 


Tax  Liens  Made  Legal  Investments  for  Savings  Banks. 

In  order  that  there  may  be  as  wide  a  market  as  possible 
for  the  sale  of  tax  liens,  it  is  proposed  that  they  shall  be  a  legal 
investment  for  savings  banks,  the  following  bill  is,  therefore, 
proposed  to  accomplish  this  object: 

An  Act  to  amend  the  Banking  Law  by  providing  the  tax 
liens  of  The  City  of  New  York  shall  be  lawful  invest- 
ments for  savings  banks. 

The  People  of  the  State  of  New  York,  represented  in  Senate 
atid  Assembly,  do  enact  as  follows: 

§  I.  Subdivision  four  of  section  one  hundred  sixteen 
of  chapter  six  hundred  eighty-nine  of  the  Laws  of  eighteen 
hundred  and  ninety-two,  being  chapter  thirty-seven  of  the 
General  Laws,  as  amended  by  chapter  three  hundred  twenty- 
eight  of  the  Laws  of  nineteen  hundred  and  three,  is  hereby 
amended  so  as  to  read  as  follows : 

4,  In  transfers  of  tax  liens  of  the  City  of  New  York  where 
the  amount  of  tax  liens  does  exceed  half  the  assessed  value  of 
the  real  property  encumbered  thereby,  in  the  stocks  or  bonds 


U\ 


■ 


42 

of  any  city,  county,  town  or  village,  school  district  bonds  and 
union  free  school  district  bonds  issued  for  school  purposes, 
or  in  the  interest  bearing  obligations  of  any  city,  county,  town 
or  village  of  this  state,  issued  pursuant  to  the  authority  of 
any  law  of  the  state,  for  the  payment  of  which  the  faith  and 
credit  of  the  municipality  issuing  them  are  pledged. 

§  2.     This  act  shall  take  effect  the  first  day  of  January,  nine- 
teen hundred  and  nine. 


IP' 


»| 


»i 


« 

i 


ADVISORY  COMMISSION 


DM 


Taxation  and  Finance. 


PROPOSED  REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND  REVENUE. 


DECEMBER,  1907. 


f 


Nhw  YoRit : 

MARTIN  B.  BROWN  COMPANY,  PRINTERS  AND  STATIONERS 

Nos.  49  TO  57  Park  Place. 

1907. 


I 


I 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance, 


PROPOSED  REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND   REVENUE. 


DECEMBER,  1907. 


I 


i: 


New  York  : 

MARTIN  B.  BROWN  COMPANY.  PRINTERS  AND   STATIONERS 

Nos.  49  TO  57  Park  Placb. 

1907. 


Chairman, 
Edgar  J.  Levey. 


'Committee  on  Taxation  and  Revenue. 


Lawson  Purdy, 
Edwin  R.  A.  Seligman, 
Francis  Lynde  Stetson, 


Morris  K.  Jesup, 
Joseph  Haag, 
Edward  L.  Heydecker. 


Committee  on  The  City  Debt  and  Special  Assessments. 

Edward  M.  Shepard,  Charles  T.  Barney, 

John  L.  Cadwalader,  Francis  Key  Pendleton, 

Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


•  !* 


I 


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IP' 


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I  ; 


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THE  COLLECTION  OF  ARREARS  OF  REAL  ESTATE 
TAXES  AND  ASSESSMENTS. 

Introduction. 

Long  experience  in  the  Finance  Department  convinced 
Mr.  Joseph  Haag,  when  Chief  Bookkeeper,  that  the  method 
for  the  collection  of  arrears  of  taxes  and  assessments  was 
hopelessly  inadequate.  In  1902  he  presented  to  the  Comp- 
troller an  outline  of  what  he  regarded  as  a  satisfactory  method. 
No  steps  were  taken  to  work  out  this  plan  in  detail  until  a 
year  and  a  half  ago,  when  Mr.  Haag  presented  the  plan  to  Mr. 
Purdy,  Chairman  of  the  Committee  on  Taxation  and  Revenue 
of  the  Mayor's  Advisory  Commission.  Mr.  Purdy  then  pre- 
pared a  rough  draft  of  a  bill  amending  Title  5  of  Chapter 
XVII.  of  the  Charter,  which  was  printed  and  submitted  to  the 
Committee  on  Taxation  and  Revenue.  The  plan  was  so  far 
approved  by  the  Committee  in  principle  that  it  seemed  desir- 
able to  perfect  the  bill.  The  bill  as  prepared  by  Mr.  Purdy 
was  submitted  to  Mr.  Walter  Lindner,  Solicitor  of  the  Title 
Guarantee  and  Trust  Company,  and  he  became  so  much 
interested  in  the  plan  that  he  was  kind  enough  to  volunteer  to 
aid  the  Committee.  Mr.  Lindner  has  now  carefully  revised 
the  bill,  inserting  the  provisions  necessary  to  make  it 
thoroughly  workable,  having  in  view  the  necessity  for  such 
perfection  of  detail  as  will  result  in  the  City  being  able  to 
insure  a  perfectly  good  title  to  the  purchaser  of  real  property 
when  ultimately  sold  for  taxes. 

Mr.  Lindner  has  had  in  mind  also  the  necessity  for  mak- 
ing the  tax  liens  provided  for  in  the  bill  an  attractive  invest- 
ment. The  Committee  has  also  had  the  benefit  of  the  advice 
and  assistance  of  Mr.  Edward  L.  Heydecker,  the  Editor  of 
the  General  Laws  of  New  York,  now  a  member  of  the  Committee. 


1^' 


M'. 

pi: 


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■  1 

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» 

The  Present  Method. 
The  present  method  of  enforcing  the  payment  of  arrears  of 
real  estate  taxes,  assessments  and  water  rents  is  contained  in 
Title  5  of  Chapter  XVII.  of  the  Charter  and  was  taken,  almost 
without  change,  from  the  Charter  of  the  old  City  of  New  York, 
called  The  Consolidation  Act.  The  plan  in  substantially  its  pres- 
ent form  has  been  in  force  for  many  years.  Briefly  described  it  is 
as  follows: 

Taxes,  assessments  and  water  rents  are  liens  upon  the  land 
assessed  and  are  preferred  in  payment  to  all  other  charges.  When 
taxes  or  assessments  are  unpaid  for  three  years  and  water  rents 
for  four  years  it  is  lawful  for  the  Collector  of  Assessments  and 
Arrears,  under  the  direction  of  the  Comptroller,  to  advertise  for 
sale  a  lease  of  the  property  for  the  lowest  term  of  years  at  which 
any  person  shall  offer  to  take  the  same  in  consideration  of  advanc- 
ing the  arrears,  with  interest  at  the  rate  of  seven  per  cent.,  to  the 
time  of  sale.  The  purchaser  of  such  leases  receives  a  certificate 
of  sale  describing  the  property,  the  term  of  the  lease,  the  amount 
of  arrears,  interest,  &c.,  advanced  in  payment  for  the  lease  and  the 
time  when  the  purchaser  will  be  entitled  to  the  lease  of  the  prop- 
erty. If  there  are  no  bids  for  a  lease  of  any  property  offered  for 
sale,  the  City  of  New  York  may  bid  it  in  for  the  city. 

If  no  one  interested  m  the  property  pays  the  amount  mentioned 
in  the  certificate  of  sale  within  two  years  from  the  date  of  the 
certificate,  with  interest  at  the  rate  of  fourteen  per  cent.,  the 
Comptroller  shall  execute  to  the  purchaser  a  lease  of  the  prop- 
erty for  the  term  of  years  for  which  it  has  been  sold.  The  lease 
cannot  be  executed  and  delivered  until  six  months  after  due 
publication  of  a  notice  that  unless  the  property  be  redeemed 
by  a  certain  day,  the  lease  will  be  conveyed  to  the  purchaser. 


Objections  to  the  Sale  of  Leases. 

The  experience  of  the  old  City  of  New  York  with  this  method 
of  enforcing  payment  of  arrears  has  been  that  a  very  small  per 
centage  of  the  property  put  up  for  sale  has  been  bid  for  by  individ- 
uals, the  bulk  of  the  property  being  bid  in  by  the  representatives 
of  the  city,  and  the  amount  realized  from  actual  sales  is  inconsider- 
able. As  the  sole  object  of  the  sale  is  to  realize  the  amount  due 
the  city,  the  whole  object  of  the  plan  is  defeated. 

Because  of  the  small  number  of  bidders,  the  leases  are  very 
long  and  the  risk  to  the  owners  of  property  correspondingly  great 
if  the  lease  should  be  upheld.  Leases  are  sold  for  five  hundred 
years.  This  is  practically  equivalent  to  the  sale  of  the  fee.  Under 
such  circumstances,  the  owner  of  the  property  would  receive 
nothing,  his  property  would  be  totally  lost  because  he  had  failed 
or  neglected  to  pay  the  city  within  the  time  required  by  law  a  small 
percentage  of  its  value.  In  view  of  this  great  danger  to  owners 
of  property  the  Courts  have  been  exceedingly  vigilant  to  detect 
flaws  in  the  procedure  so  that  it  is  commonly  believed  that  a  valid 
lease  sold  for  arrears  is  almost  unknown.  With  the  value  of  the 
leases  so  utterly  discredited,  it  is  no  wonder  there  are  few  bidders 
and  that  when  leases  are  sold  the  term  of  years  is  abnormally 
long. 

So  poor  has  been  the  result  of  these  sales  of  leases  that 
there  have  been  only  six  such  sales  in  the  last  thirty-two  years. 
The  objections  may  be  summarized  as  follows:  The  expense 
and  the  danger  to  property  owners  is  excessive  and  unreason- 
able. The  City  is  unable  by  the  sale  of  leases  to  collect  its 
revenue  when  it  requires  it. 

Some  persons  have  suggested  that  the  City  of  New  York 
should  adopt  the  remedy  existing  in  the  former  City  of  Brooklyn 
by  the  sale  at  auction  of  the  fee  of  the  property.  Although  this 
method  was  effective  in  enforcing  the  payment  of  arrears,  it  is 


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objectionable  because  too  severe  on  property  owners  whose  prop- 
erty may  be  sacrificed  and  because  it  is  difficult  to  convey  good 
titfe  by  a  sale  for  taxes.  Titles  are  often  clouded  and  purchasers 
being  obliged  to  take  the  risk  of  a  bad  title  do  not  bid  the  full 
value  of  the  property. 

The  following  plan,  it  is  deemed,  would  be  effective  in  collect- 
ing arrears  promptly  and  at  the  same  time  would  impose  nc 
unconscionable  penalties  on  property  owners  and  in  many  cases 
would,  in  fact,  reduce  the  amount  of  interest  they  may  now  be 
required  to  pay. 

The  Remedy. 

To  be  satisfactory  any  method  of  collecting  arrears  of  real 
estate  taxes,  assessments  and  water  rents  must  combine  two 
qualities : 

The  remedy  must  be  eflfective  and  enable  the  city  to  collect  ar- 
rears promptly. 

The  remedy  must  catise  property  owners  the  least  possible  in- 
convenience and  risk. 

The  proposed  remedy  is  deemed  to  meet  these  conditions.  It 
is  briefly  described  as  follows: 

As  soon  as  taxes,  assessments  and  water  rents  are  laid,  a  lien 
attaches  to  the  property  in  favor  of  the  city  which  is  prior  to  any 
and  all  other  liens.  When  taxes  or  assessments  are  three  years 
in  arrears,  or  water  rents  four  years,  the  lien  of  all  Arrears  which 
shall  have  accrued  up  to  the  day  of  the  first  advertisement  of  sale, 
will  be  sold  at  auction  to  the  person  who  shall  bid  the  lowest  rate 
of  interest  not  exceeding  twelve  per  cent.  Upon  payment  of  the 
purchase  money  a  conveyance  of  the  "tax  lien,"  payable  in  three 
years,  will  be  executed  by  the  city  to  the  purchaser. 

The  city  will  guarantee  the  validity  of  the  lien  so  that  the  only 
risk  taken  by  the  purchaser  will  be  the  sufficient  value  of  the 
property  affected  by  the  lien  and  the  possible  trouble  of  collection. 


"  Transfers  of  tax  liens  "  will  be  registered  in  the  office  of 
the  Collector  of  Assessments  and  Arrears  and  will  be  record- 
able in  the  office  of  the  Register.  The  procedure  for  collection 
will  be  the  same  as  for  the  collection  of  a  mortgage. 

A  "  transfer  of  tax  lien  "  will  provide  that  the  whole  of  the 
principal  sum  which  the  "  transfer  of  tax  lien  "  is  given  to 
secure  shall  become  due  at  the  option  of  the  owner  thereof 
after  default  in  the  payment  of  interest  for  thirty  days  or  after 
default  in  the  payment  of  any  subsequently  accruing  tax,  assess- 
ment or  water  rent  for  six  months.  This  provision  will  very 
nearly  insure  the  continuous  future  payment  of  taxes  and  assess- 
ments, subsequent  to  the  sale  of  a  "tax  lien,"  as  the  owner  of  the 
property  must  pay  or  suffer  the  foreclosure  of  the  "tax  lien." 

Any  person  having  an  interest  in  property  affected  by  a  "tax 
lien"  may  discharge  the  same  before  maturity  on  giving  thirty 
days'  notice  to  the  holder  of  the  transfer  thereof  upon  payment 
of  the  principal  with  interest  to  the  next  succeeding  interest 
period. 

"Tax  liens"  will  be  exempt  from  taxation  and  will  be  made 
legal  investments  for  Savings  Banks  in  case  they  do  not  exceed 
half  the  assessed  value  of  the  property  affected. 

Advantages. 

"Tax  liens"  will  be  a  thoroughly  safe  investment,  being  abso- 
lutely the  first  liens  on  city  real  estate.  "Tax  liens"  for  large  sums 
should  sell  readily  at  a  low  rate  of  interest  and  even  "tax  liens" 
for  small  sums  should  be  a  profitable  investment  and  sell  easily  at 
some  rate  less  than  the  maximum.  It  is  probable  that  some  per- 
sons and  corporations  will  undertake  the  purchase  of  "tax  liens" 
as  a  business,  perhaps  issuing  debenture  bonds  thereby  secured. 

If  "tax  liens"  are  readily  salable  the  city  will  no  longer  be  kept 
out  of  the  use  of  its  proper  income.  The  trouble  and  expense  of 
collection  will  be  shifted  from  the  city  to  private  parties. 


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From  the  standpoint  of  the  taxpayer,  the  proposed  plan  has 
the  great  advantage  that,  the  payment  of  taxes  over  three  years 
in  arrears  can  be  postponed  for  three  years  more  upon  payment  of 
interest  and  subsequent  taxes.  Moreover,  the  taxpayer,  if  a 
resident,  will  always  get  personal  notice,  and  will  generally  get 
personal  notice  even  if  a  non-resident,  when  any  action  is  brought 
which  might  result  in  the  loss  of  the  property. 

Description  of  the  Bill. 
The  Bill  amends  Chapter  XVII.  of  the  New  York  Charter. 

Section  i  of  the  Bill  amends  the  caption  of  Chapter  XVII., 
by  inserting  the  words,  "  tax  liens  on  "  so  that  Title  5  shall 
read :  "  Sales  of  tax  liens  on  lands  for  taxes,  assessments  and 
water  rents." 

Section  2  of  the  Bill  amends  Charter  Section  909,  chang- 
ing the  definition  of  water  rents,  by  making  it  more  specific. 

Section  3  amends  Charter  Section  920,  as  amended  by 
Chapter  303  of  the  Laws  of  1907,  by  inserting  the  words  "  the 
tax  lien." 

Section  4  amends  Charter  Section  964  by  inserting  the 
words  "  the  tax  lien." 

Section  5  of  the  Bill  amends  the  caption  of  Title  5  so  as 
to  conform  to  the  caption  of  the  Chapter. 

Section  6  amends  Charter  Section  1017  by  more  carefully 
defining  "water  rents."  This  section  determines  the  time 
when  taxes,  assessments  and  water  rents  become  liens. 

Charter  Sections  1018  and  1019  remain  unchanged.  They 
relate  to  the  publication  of  notice  of  the  confirmation  of  assess- 
ments, and  the  charging  of  interest,  if  assessments  are  unpaid 
after  sixty  days. 

Section  7.  Charter  Section  1020  provides  the  rate  of 
interest  to  be  charged  on  all  arrears  of  taxes  and  assessments. 
The  section  is  amended  to  conform  to  the  sale  of  the  tax  lien 
instead  of  a  lease. 


II 


Section  8  amends  Charter  Section  1021,  by  providing  for 
sale  of  the  tax  lien  for  arrears  of  assessments,  and  provides 
for  apportionment  by  the  Board  of  Assessors  when  parcels  are 
divided. 

Sections  9  and  10  make  slight  verbal  changes  in  Charter 
Sections  1023  and  1024,  otherwise  1022,  1023,  1023a  and  1024 
remained  unchanged.  They  relate  to  water  rents ;  the  return  of 
arrears  to  the  Collector  by  the  Receiver  of  Taxes;  notifying 
taxpayers  of  assessments  and  provision  for  the  inclusion  of 
water  rents  in  the  assessment  rolls. 

Section  ii  amends  Charter  Section  1025.  This  section 
provides  for  the  record  of  arrears  on  the  assessment  rolls  and 
remains  substantially  unchanged. 

Section  12  amends  Charter  Section  1026.  This  section 
provides  for  notices  of  arrears  to  be  printed  on  tax  bills  and 
is  amended  to  conform  to  the  new  remedy,  so  that  warning  of 
the  sale  of  a  "  tax  lien  "  shall  be  given  instead  of  notice  of 
the  sale  of  the  lease. 

Section  13  amends  Charter  Section  1027.  This  section 
now  provides  the  proce^dure  for  the  sale  of  leases  and  is 
amended  so  as  to  provide  for  the  sale  of  "  tax  liens."  Such 
procedure  is  substantially  unchanged.  It  provides  that  when 
taxes  or  assessments  are  unpaid  for  three  years  or  water  rents 
for  four  years,  the  Collector  of  Assessments  and  Arrears  shall 
advertise  "  tax  liens  "  for  sale  for  a  term  of  three  years  to  the 
person  who  bids  the  lowest  rate  of  interest,  not  exceeding 
twelve  per  cent.  The  Collector  shall  give  to  the  purchaser  of 
"  tax  liens  "  a  "  transfer  of  tax  lien,"  describing  the  property 
encumbered  by  the  lien;  the  sum  to  be  paid;  the  amount 
advanced  and  the  rate  of  interest.  All  the  provisions  for 
advertising  such  sales  are  preserved  unchanged. 

Section  14.  Charter  Section  1028  is  repealed.  It  pro- 
vided for  the  advertisement  of  contiguous  lots  as  one  parcel, 
which  would  endanger  the  accuracy  of  the  procedure. 


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SiXTiON  15.  Charter  Section  1029  is  renumbered  so  as  to 
be  1028,  and  is  unchanged  in  substance.  It  provides  that  the 
Comptroller  may  postpone  sales. 

Section  16.  Charter  Section  1030  is  renumbered  so  as  to  be 
Section  1029.  It  provides  that  the  Collector  of  Assessments  and 
Arrears  shall  conduct  the  sales  and  is  amended  so  as  to  provide 
for  a  deposit  or  payment  on  account  by  the  purchaser  at  the  time 
of  sale  upon  terms  and  conditions  prescribed  by  the  Comptroller. 
*•  Transfers  of  Tax  liens  "  shall  be  delivered  to  the  purchaser, 
without  charge,  upon  payment  of  the  amount  due.  "  Transfers 
of  Tax  liens"  not  paid  for  within  thirty  days  may  be  canceled  and 
the  deposit  forfeited,  and  a  resale  made. 

Section  17.  Charter  Sections  103 1  to  1049,  both  inclusive, 
are  repealed.  All  these  Sections  relate  solely  to  the  procedure  to 
be  followed  in  case  of  the  sale  of  leases  and  have  no  bearing  upon 
the  sale  of  "tax  liens." 

•Section  18  enacts  a  new  section  to  be  numbered  1030, 
defining  **  transfer  of  tax  lien  "  and  describing  its  nature  and 
incidents.  *'  Transfers  of  Tax  liens"  shall  be  executed  by  or  in 
behalf  of  the  Collector  of  Assessments  and  Arrears. 


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Section  19  enacts  a  new  section  to  be  numbered  103 1. 
It  provides  for  a  public  record  of  sales  of  "  Tax  liens  "  to  be 
kept  by  the  Collector  of  Assessments  and  Arrears.  A 
"  transfer  of  tax  lien  "  and  a  duly  acknowledged  assignment 
thereof  shall  be  deemed  conveyances  under  the  Real  Property- 
Law  and  may  be  recorded  as  such.  Failure  to  record  does  not 
invalidate  the  lien.  The  various  records  may  be  read  in 
evidence. 


Section  20  enacts  a   new  section  to  be  numbered   1032. 
This  section  defines  the  rights  of  purchasers  of  tax  liens. 


13 

Section  21  enacts  a  new  section  to  be  numbered  1033, 
providing  for  the  discharge  of  the  tax  lien  when  paid. 

Section  22  enacts  a  new  section  to  be  numbered  1034, 
providing  for  the  exemption  from  taxation  of  tax  liens. 

Sections  23,  24,  25,  26,  27,  28  and  29  enact  new  sections 
to  be  numbered  1035,  1036;  1037,  1038,  1039,  1040  and  1041, 
providing  the  procedure  for  foreclosure  of  tax  liens. 

Section  30  adds  a  new  section  to  be  Section  1042.  It  pro- 
vides for  the  procedure  when  no  bid  for  a  "tax  lien"  is  received. 
In  this  case  the  Comptroller  and  Corporation  Counsel  shall  in- 
vestigate the  facts  and  reduce  the  amount  to  a  sum  for  which, 
in  their  judgment,  a  "tax  lien"  bearing  twelve  per  cent,  interest 
can  be  sold.  They  shall  file  a  certificate  in  writing  setting  forth 
the  amount  so  determined,  with  their  reasons.  Such  "tax  lien" 
shall  then  be  advertised  for  sale  to  the  person  who  shall  bid  the 
highest  amount  of  money  in  excess  of  the  amount  fixed  by  the 
Comptroller  and  Corporation  Counsel.  If  still  no  bid  is  received, 
the  Comptroller  and  Corporation  Counsel  shall  reconsider  their 
determination  and  proceed  as  before.  This  Section  is  added  in 
order  that  some  collection  may  be  made  by  the  city  and  title  cleared 
in  cases  where  the  arrears  equal  or  exceed  the  value  of  the  prop- 
erty. 

Sections  31  and  32  enact  new  sections  to  be  numbered 
1043  and  1044,  providing  for  the  reimbursement  of  the  owner 
of  a  "  transfer  of  tax  lien  "  in  case  the  tax  lien  shall  be  vacated 
or  canceled  in  whole  or  in  part. 

Section  33  enacts  a  new  section  to  be  numbered  1045. 
It  provides  that  owners  of  property  may  question  the  validity 
of  tax  liens  on  their  property ;  that  such  shall  be  referred  to 
the  Corporation  Counsel,  who  may  direct  the  surrender  of  a 
transfer  of  tax  lien  and  the  refunding  of  the  amount  paid 
therefor. 


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Section  34  enacts  a  new  section  to  be  numbered  1046. 
It  provides  that  the  Corporation  Counsel  shall  be  notified  of 
any  proceeding  adverse  to  the  validity  of  a  tax  lien  and  may 
intervene  in  such  proceeding. 

Section  35  enacts  a  new  section  to  be  numbered  1047. 
It  provides  for  reimbursement  of  the  holder  of  a  transfer  of 
lien  which  is  invalid  in  whole  or  in  part,  and  directs  the  resale 
of  so  much  of  the  tax  lien  as  remains  valid. 

Section  36.  Charter  Section  1050  is  renumbered  so  as  to 
be  Section  1048.  It  provides  for  the  delivery  of  a  duplicate 
in  case  the  "  transfer  of  tax  lien  "  is  lost,  and  is  otherwise 
without  change  of  substance,  except  that  the  provision  for 
registration  is  omitted  here  and  inserted  in  Section  1031. 

Section  37.  Charter  Section  1051  is  renumbered  so  as  to 
be  1049.  It  provides  that  bills  for  the  arrears  of  taxes  and 
assessments  shall  be  furnished  when  requested.  It  also  pro- 
vides that  the  certificate  of  the  Collector,  countersigned  by  the 
Comptroller,  shall  free  the  property  from  all  liens  except  the 
lien  of  "  transfers  of  tax  liens  "  duly  sold.  The  section  is 
unchanged  except  in  so  far  as  was  necessary  to  conform  the 
procedure  to  the  method  of  collection  by  the  sale  of  "  tax 
liens  "  instead  of  leases. 

Section  38.  Charter  Section  1052  is  renumbered  so  as  to 
be  1050.  It  provides  that  fees  for  searches  shall  be  included  in 
the  bills  mentioned  in  the  preceding  section  and  is  unchanged. 

Section  39  repeals  Charter  Section  1053.  It  provided  for 
a  complete  record  of  sales,  now  contained  in  Section  1031. 

Section  40.  Charter  Section  1054  is  renumbered  so  as  to 
be  Section  105 1.  It  provides  for  the  preservation  of  affidavits 
of  the  publication  of  notices  and  remains  unchanged. 

Section  41.  This  section  is  not  a  part  of  the  Charter  and  is 
designed  to  save  to  the  city  and  the  taxpayers  all  rights 
acquired  before  the  passage  of  the  Act. 


15 


The  proposed  bill  is  as  follows : 

An  Act  to  amend  the  Greater  New  York  Charter  relative  to 
sales  of  lands  for  taxes,  assessments  and  water  rates. 

The  People  of  the  State  of  New  York,  represented  in  Senate  and 
Assembly,  do  enact  as  folloivs: 

Section  i.  The  caption  of  Chapter  XVII.  of  the  Greater 
New  York  Charter,  as  re-enacted  by  chapter  four  hundred  and 
sixty-six  of  the  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  so  as  to  read  as  follows: 

CHAPTER  XVII. 
Taxes  and  Assessments. 
Title  I.     Department     of     Taxes     and     Assessments; 

powers  and  duties. 
Title  2.     Assessments  for    local    improvements    other 
than    those    confirmed    by    a    Court    of 
Record. 
Title  3.     Vacating  and  modifying  assessments  for  local 
improvements  other  than  those  confirmed 
by  a  Court  of  Record. 
Title  4.     Opening  Streets  and  Parks. 
Title  5.     Sales  of  tax  liens  on  lands  for  taxes,  assess- 
ments and  water  rates. 
§  2.     Section  nine  hundred  and  nine  of  the  Greater  New 
York   Charter,  as   re-enacted  by   chapter  four  hundred  and 
sixty-six  of  the  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  so  as  to  read  as  follows : 

Assessment  Rolls  to  Remain  in  Custody  of  Board  of 

Aldermen. 

§  909.  The  tax  or  assessment  rolls,  when  finally  sub- 
mitted to  the  board  of  aldermen  on  the  first  Monday  of  July 
in  each  year,  shall  remain  in  its  custody,  but  the  president  of 
the  board  may,  by  written  permission,  permit  access  to  them, 
and  he  is  hereby,  in  the  name  of  the  board  of  aldermen  and  as 
its  act,  authorized  and  directed  to  cause  to  be  properly  esti- 
mated and  computed  the  taxes  annually  imposed,  and  cause 


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the  same  to  be  properly  set  down  or  extended  in  the  several 
assessment  rolls  or  tax  books,  as  required  by  the  next  section. 
It  shall  also  be  the  duty  of  said  president  to  cause  the  items 
of  said  taxes  to  be  carefully  added,  and  to  set  down  the 
amount  of  the  same  therein ;  and  when  completed  to  deliver 
the  tax  books  relating  to  real  estate  to  the  comptroller,  in 
order  that  the  unpaid  water  rents,  and  flic  expenses  of  meters, 
with  their  connections  and  setting,  zi*ater  rates  and  other  lazvful 
charges  for* the  supply  of  water  measured  by  meters  of  any  [each] 
preceding  year  may  be  entered  therein.  After  such  completion 
of  the  assessment  rolls  or  tax  books  it  shall  be  the  duty  of  the 
city  clerk  to  procure  the  proper  warrants  authorizing  and 
requiring  the  receiver  of  taxes  to  collect  the  several  sums 
therein  mentioned  according  to  law,  and  such  warrants  need 
be  signed  only  by  the  president  of  the  board  of  aldermen,  and 
countersigned  by  the  city  clerk,  and  immediately  thereafter 
the  president  of  the  board  of  aldermen  shall  deliver  the  said 
assessment  rolls,  with  the  warrants  aforesaid  annexed  thereto, 
to  the  receiver  of  taxes,  at  the  same  time  notifying  the  comp- 
troller of  the  amount  of  taxes  in  each  book,  in  order  that  he 
may  cause  the  proper  sum  to  be  charged  to  the  receiver  for 
collection. 

§  3.  Section  nine  hundred  and  twenty  of  said  law,  as 
amended  by  chapter  three  hundred  and  three  of  the  laws  of 
nineteen  hundred  and  seven,  is  hereby  amended  so  as  to  read 
as  follows: 


Undivided  Parts  of  Taxes:     Payment  of. 

§  920.  If  a  sum  of  money  in  gross  has  been  or  shall  be 
taxed  upon  any  lands  or  premises,  any  person  or  persons 
claiming  any  divided  or  undivided  part  thereof  may  pay  such 
part  of  the  sum  of  money  so  taxed,  also  of  the  interest  and 
charges  due  or  charged  thereon,  as  the  said  comptroller  may 
deem  to  be  just  and  equitable.  The  department  of  taxes  and 
assessments  shall  apportion  the  assessed  valuation  of  such 


17 


lands  or  premises  when  requested  by  the  comptroller  so  to  do, 
and  shall  certify  such  apportionment  to  him.  The  determina- 
tion of  the  said  comptroller  shall  be  based  upon  such  appor- 
tionment so  certified.  The  remainder  of  the  sum  of  money 
so  taxed,  together  with  the  interest  and  charges,  shall  be  a 
lien  upon  the  residue  of  the  land  and  premises  only,  and  the  tax 
lien  upon  such  [which]  residue  may  be  sold  to  satisfy  [the 
residue  of]  such  tax,  interest  or  charges  thereon,  in  the  same 
manner  as  though  the  residue  of  said  tax  had  been  imposed  only 
upon  [the]  such  residue  of  said  lands  or  premises. 

§  4.  Section  nine  hundred  and  sixty-four  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Reassessment. 

§  964.  Any  lands  which  may  be  discharged  from  any  lien 
for  an  assessment  for  any  local  improvement  or  as  to  which  a 
sale  [for  non-payment]  of  the  tax  lien  thereon  for  such  assess- 
ments authorized  to  be  mad^  by  section  ten  hundred  and  twenty- 
seven  of  this  act  has  been  vacated  or  set  aside  may  be  again 
assessed  in  the  manner  provided  by  law,  for  such  amount  as 
would  have  been  justly  chargeable  if  fraud  or  irregularity  had 
not  been  committed;  and  the  amount  so  assessed  shall  be  a 
lien  on  said  lands  until  paid,  and  shall  be  collectible  in  the 
manner  provided  by  law  for  the  collection  of  assessments,  but 
all  proceedings  to  make  a  new  assessment  shall  be  at  the 
expense  of  the  city. 

§  5.  The  caption  of  Title  5  of  Chapter  XVH.  of  the 
Greater  New  York  Charter,  as  re-enacted  by  chapter  four 
hundred  and  sixty-six  of  the  Laws  of  nineteen  hundred  and  one, 
is  hereby  amended  so  as  to  read  as  follows : 

Title  5.     Sales  of  tax  liens  on  lands   for  taxes,  assess- 
ments and  water  rates. 
§  6.     Section  ten  hundred  and  seventeen  of  said  law  is  hereby 
amended  so  as  to  read  as  follows : 


i8 


.Hi' 


I'  ' 


i 


1. 1 


m 


When  Taxes  and  Water  Rents  to  be  Liens  on  Lands 

Assessed. 

§  1017.  All  taxes  and  all  assessments  for  local  improve- 
ments and  all  water  rents,  and  the  expenses  of  zvater  meters,  with 
their  connections  and  settint:^,  and  water  rates  and  other  laivfnl 
charges  for  the  snpply  of  nvter  measnred  by  meters,  and  the  in- 
terest and  charges  thereon,  which  may,  in  The  City  of  New  York, 
as  by  this  act  constituted,  hereafter  be  laid  or  may  have  hereto- 
fore been  laid,  upon  any  real  estate  now  in  said  city,  shall 
continue  to  be,  until  paid,  a  lien  thereon,  and  shall  be  pre- 
ferred in  payment  to  all  other  charges.  No  assessments  for 
any  local  improvements  shall  be  deemed  to  be  fully  confirmed, 
so  as  to  be  due  and  be  a  lien  upon  the  property  included  in  the 
assessment,  until  ten  days  after  the  title  thereof,  with  the  date 
of  confirmation  shall  be  entered  with  the  date  of  such  entry, 
in  a  record  of  the  titles  of  assessments  confirmed,  to  be  kept 
in  the  office  of  the  collector  of  assessments  and  arrears. 

The  zvords  "  n'ater  rents"  whenever  they  are  used  in  this  title 
shall  include,  the  expenses  of  meters,  zvith  their  connections  and 
setting,  water  rents,  nHster  rates  and  all  laivful  charges  for  the 
supply  of  water  measured  by  meters. 

§  7.  Section  ten  hundred  and  twenty  of  the  Greater  New 
York  Giarter  is  herebv  amended  so  as  to  read  as  follows : 


R 


I 


15  ■ 


Rate. 

§  1020.  Interest  shall  hereafter  be  charged  and  collected 
at  the  rate  of  seven  per  centum  per  annum  on  all  arrears  of 
taxes  and  assessments  returned  to  the  collector  of  assessments 
and  arrears  from  the  time  they  become  due  [until  the  date  of 
payment,  or  in  case  a  sale  has  taken  place,  as  provided  in 
section  ten  hundred  and  twenty-seven  until  the  date  of  the 
certificate  mentioned  in  said  section]  and  on  [thej  water  rents 
and  [charges  for  water]   the  penalties  thereon  from  the  time 


19 

the  taxes  become  due,  to  which  they  may  be  added  [as  re- 
quired by  section  ten  hundred  and  twenty-five  until  the  same 
date  respectively]  until  the  date  of  payment,  or  until  such  other 
date  when  the  amount  thereof  may  have  been  advanced  to  the 
city  by  the  purchaser  of  the  tax  lien  in  respect  thereof. 

§  8.  Section  ten  hundred  and  t went}  -one  of  said  law  is  hereby 
amended  so  as  to  read  as  follows : 

Apportionment  of  Assessment. 
§  1021.  If  a  sum  of  money  in  gross  has  been  or  shall  be 
assessed  for  local  improvements,  upon  any  lands  or  premises 
in  The  City  of  New  York,  any  person  or  persons  claiming  any 
divided  or  undivided  part  thereof  may  pay  such  part  of  the 
sums  of  money  so  assessed,  also  of  the  interest  and  charges 
due  or  charged  thereon,  as  the  comptroller  may  deem  to  be 
just  and  equitable.  The  board  of  assessors  shall  apportion  the 
assessed  valuation  of  such  lands  or  premises  zi*hen  requested 
by  the  comptroller  so  to  do,  and  shall  certify  such  apportion- 
ment to  him.  The  determination  of  the  said  comptroller  shall 
be  based  upon  such  apportionment  so  certified,  [and]  The  re- 
mainder of  the  sum  of  money  so  assessed,  together  with  the 
interest  and  charges,  shall  be  a  lien  upon  the  residue  of  the 
land  and  premises  only,  and  the  tax  lien  upon  such  [which] 
residue  may  be  sold  in  pursuance  of  the  provisions  of  this  act.  to 
satisfy  the  residue  of  such  assessment,  interest  or  charges  thereon, 
in  the  same  manner  as  though  the  residue  of  said  assessment  had 
been  imposed  upon  [the]  such  residue  of  said  land  or  premises. 

§  9.     Section  ten  hundred  and  twenty-three  of  said  law  is 
hereby  amended  so  as  to  read  as  follows: 

Receiver  of  Taxes  to  Return  Arrears  to  the  Collector. 
§  1023.  The  receiver  of  taxes  shall,  on  the  first  day  of 
June,  in  each  year,  make  a  return  to  the  collector  of  assess- 
ments and  arrears,  of  all  taxes  on  real  estate  and  of  water 
[rates  and]  rents,  which  have  been  added  thereto,  remaining 


i 


il 


»l|l 


20 

unpaid,  and  shall  notify  the  comptroller  of  the  aggregate 
amount  of  arrears  so  returned,  and  balance  on  his  books  the 
accounts  of  the  arrears  so  returned,  by  charging  the  amount 
thereof  to  the  said  collector,  and  shall  thereafter  receive  no 
payments  on  accounts  of  arrears  so  returned,  but  may  never- 
theless certify  to  the  collector  of  assessments  and  arrears  any 
errors,  which  shall,  upon  such  certificate,  be  corrected  by  the 
said  collector  any  time  before  settlement. 

§  ID.     Section  ten  hundred  and  twenty-four  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Water  Rents  to  be  Provided  for  in  Assessment  Rolls. 
§  1024.  There  shall  be  ruled  in  the  yearly  assessment  rolls 
of  each  section  or  ward  a  column  headed  "water  rents"  in 
which  immediately  after  th-  confirmation  of  such  assessment 
rolls,  the  collector  of  assessments  and  arrears  shall  cause  to 
be  entered  opposite  the  ward,  lot,  town  block  and  map  num- 
bers of  the  property  on  which  the  said  arrears  may  be  due, 
the  amounts  due  for  "  water  rents  "  and  the  expenses  of  meters, 
unth  their  connections  and  setting,  water  rates  and  other  lawful 
charges  for  the  supply  of  water  measured  by  meters,  as  trans- 
mitted to  him  by  the  commissioner  of  water  supply,  gas  and 
electricity,  in  accordance  with  the  law,  and  the  same  shall  be  col- 
lected at  the  same  time  and  in  the  same  manner  [withj  as  the 
taxes  to  which  they  shall  be  added. 

§  II.     Section  ten  hundred  and  twenty-five  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Arrears  Likewise  to  be  Provided  For. 
§  1025.  There  shall  be  ruled  in  the  yearly  asssessment 
rolls  of  the  taxes  in  each  section  or  ward,  a  column  headed 
"arrears,"  in  which  the  collector  of  assessments  and  arrears 
shall  annually,  before  any  taxes  for  the  year  are  collected, 
cause  to  be  entered  the  word  "  arrears  "  [or  "  sold,"  according 
as  the  fact  may  be,J  opposite  to  the  ward,  lot,  town  block  and 
map  numbers  on  which  any  arrears  of  taxes,  or  of  taxes  with 


31 


the  water  rent  added,  shall  be  due,  or  on  which  any  assessment 
shall  remain  unpaid  which  was  due,  or  confirmed  one  month 
prior  to  the  first  of  June,  then  last  past,  [or  which  may  have 
been  sold  for  assessments,  taxes  or  water  rents,  and  yet  be 
redeemable.J 

§  12.     Section  ten  hundred  and  twenty-six  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

BilIs  for  Taxes  to  Show  Arrears. 
§  1026.  There  shall  be  ruled  a  column  for  "  arrears "  in 
every  bill  rendered  for  taxes  for  lots  on  which  said  arrears  or 
assessments,  or  taxes  with  water  rents  added,  may  be  due, 
as  aforesaid,  [or  may  have  been  sold  and  yet  be  redeemable,! 
in  which  shall  be  written  opposite  the  entry  of  the  ward,  lot, 
town  block  and  map  number  of  said  lot,  "  arrears  "  with  the 
date  when  such  arrears  or  any  part  thereof  first  accrued; 
[or  "  sold,"  according  as  the  fact  may  be  ;J  and  at  the  bottom 
of  said  bill  shall  be  printed :  "  IVhenez'er  any  tax  or  assess- 
ment shall  femain  unpaid  for  three  years  or  any  water  rent  shall 
retnain  unpaid  for  four  years  the  tax  lien  on  the  property  zvill  be 
sold  to  satisfy  such  arrears  of  taxes,  assessments  or  water  rents, 
and  all  taxes,  assessments  and  water  rents  up  to  the  day  of  the 
first  advertisement  of  sale."  ["the  columns  for  arrears  indicate 
lots  sold  for  arrears,  or  to  be  sold  therefor;  arrears  to  be  paid 
and  lots  redeemed  at  the  office  of  the  collector  of  assessments  and 
arrears."J 

§  13.  Section  ten  hundred  and  twenty-seven  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Sales  of  [LandsJ  Tax  Liens  for  Taxes  and  Assessments: 

Proceedings. 

§  1027.  The  right  of  the  city  to  receive  taxes,  assessments 
and  water  rents  and  the  lien  thereof,  may  be  sold  bv  flic  city, 
and  after  such  sale,  shall  be  transferred,  in  the  manner  provided 
by  this  title.  The  right  and  lien  so  sold  shall  be  called  "tax  lien" 
and  the  instrument  by  which  it  is  assigned  shall  be  called  "trins- 


i 


I 


II 


i 


u 


i 

I 


I!      -i 


22 


fcr  of  tax  Hen."  Whenever  any  tax  on  lands  or  tenements,  or 
any  assessments  on  lands  or  tenen!ents  for  local  improvements, 
shall  remain  unpaid  for  the  term  of  three  years  from  the  time  the 
same  shall  have  been  confirmed,  and  also  whenever  any  [rents 
forj  water  rents  in  said  city  shall  have  been  due  and  unpaid  for 
the  term  of  four  years  from  the  time  the  same  shall  have  been 
due,  it  shall  and  may  be  lawful,  for  the  collector  of  assessments 
and  arrears,  under  the  direction  of  the  comptroller,  to  adver- 
tise the  tax  liens  on  the  said  lands  and  tenements  or  any  of 
them  for  sale,  includmg  in  such  advertisement  the  tax  Hen  for  all 
items  up  to  the  day  of  the  iirst  advertisement  and  by  such  ad- 
vertisement the  owner  or  owners  of  such  lands  and  tenements 
respectively  shall  be  required  to  pay  the  amount  of  such  tax, 
assessment  or  water  rent  with  the  said  penalties  thereon  so  re- 
maining unpaid,  together  with  the  interest  thereon  at  the  rate  of 
seven  per  centum  per  annum  to  the  time  of  payment,  with  the 
charges  of  such  notice  and  advertisement,  to  the  said  collector, 
and  notice  shall  be  given  by  such  advertisement  that  if  default 
shall  be  made  in  such  payment  the  tax  lien  on  such  lands  and 
tenements  will  be  sold  at  public  auction  at  a  day  and  place  therein 
to  be  specified,  for  the  lowest  rate  of  interest,  not  exceeding 
tzvek'c  per  centum  per  annum,  [term  of  j'cars]  at  which  any 
person  or  persons  shall  offer  to  take  the  same  in  consideration 
of  advancing  the  said  tax,  assessment  [or]  and  water  rents 
and  penalties  as  the  case  may  be,  [andj  the  interest  thereon 
as  aforesaid  to  the  time  of  sale,  [andJ  the  charges  of  the  above 
mentioned  notices  and  advertisement  and  all  other  costs  and 
charges  accrued  thereon ;  and  if,  notwithstanding  such  notice, 
the  owner  or  owners  shall  refuse  or  neglect  to  pay  such  tax, 
assessment,  [or]  water  rents  and  penalties  with  the  interests  as 
aforesaid,  and  the  charges  attending  such  notice  and  adver- 
tisement, then  it  shall  and  may  be  lawful  for  the  said  collector, 
under  the  direction  of  the  said  comptroller,  to  cause  such  tax 
lien  on  such  lands  and  tenements  to  be  sold  at  public  auction 
[for  a  terra  of  years],   for   the  purpose  and  in  the  manner 


I 


2$ 

expressed  in  the  said  advertisement,  and  such  sale  shall  be 
made  on  the  day  and  at  the  place  for  that  purpose  mentioned  in 
the  said  advertisement,  and  shall  be  continued  from  time  to 
time,  if  necessary,  until  all  the  tax  liens  on  the  lands  and 
tenements  so  advertised  shall  be  sold  [and  the  said  collector 
shall  give  to  the  purchaser  or  purchasers  of  any  such  lands 
and  tenements  a  certificate  of  sale,  in  writing,  describing  the 
lands  and  tenements  so  purchased,  the  term  of  years  for 
which  the  same  shall  have  been  sold,  the  sum  paid  therefor, 
and  the  time  when  the  purchaser  will  be  entitled  to  a  lease  of 
the  said  lands  and  tenements].  But  [no]  the  tax  lien  on 
houses  or  lots,  or  improved  or  unimproved  lands,  in  the  City 
of  New  York,  shall  not  be  hereafter  sold  [or  leased]  at  public 
auction  for  the  non-payment  of  any  tax,  assessment,  or  water 
rents  which  may  be  due  thereon,  unless  notice  of  such  sale 
shall  have  been  published  once  in  each  week  successively  for 
three  months  in  the  City  Record  and  the  corporation  news- 
papers, which  advertisement  shall  contain,  appended  to  said 
notice  a  particular  and  detailed  statement  of  the  property  the 
tax  lien  on  zchich  is  to  be  sold,  [for  taxes,  assessments  or 
water  rents,]  Or  the  said  detailed  statement  and  description, 
instead  of  being  published  in  the  City  Record  and  the  cor- 
poration newspapers,  shall,  at  the  option  of  the  said  comp- 
troller, be  printed  in  a  pamphlet,  in  which  case  copies  of  the 
pamphlet  shall  be  deposited  in  the  office  of  the  said  collector, 
and  shall  be  delivered  to  any  person  applying  therefor.  And 
the  notice  provided  for  in  this  section  to  be  given  of  the  sale 
of  tax  liens  on  houses  and  lots  and  improved  and  unimproved 
lands  shall  also  state  that  the  detailed  statement  of  the  taxes, 
assessments,  or  water  rents,  and  [the  ownership  of]  the 
property  [taxes]  faxed,  assessed,  [and]  or  on  which  the  water 
rents  are  unpaid,  is  published  in  the  City  Record  and  the  coqiora- 
tion  newspapers,  or  in  a  pamphlet,  as  the  case  may  be,  and  that 
copies  of  the  pamphlet  are  deposited  in  the  office  of  said  collector, 
and  will  be  delivered  to  any  person  applying  for  the  same.     Xo 


>tl 


'I. 


f 

r 


24 

other  notice  or  demand  of  the  tax,  assessment,  or  water  rent 
shall  be  required  to  authorize  the  sale  of  tax  liens  on  any 
lands  and  tenements  as  hereinbefore  provided. 

§  14.  Section  ten  hundred  and  twenty-eight  of  said  law  is 
hereby  repealed. 

§  15.  Section  ten  hundred  and  twenty-nine  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  twenty- 
eight  and  is  amended  so  as  to  read  as  follows : 

Postponement  of  Sales. 

§  1028.  It  shall  be  lawful  for  the  comptroller  to  suspend 
or  postpone  any  sale  or  sales  of  tax  liens  on  lands  and  tene- 
ments or  any  portion  thereof  which  shall  have  been  adver- 
tised for  sale,  to  any  time  not  exceeding  fifteen  months  from 
the  day  specified  in  any  such  advertisement.  All  sales  which 
shall  be  so  postponed  or  suspended  [shallj  may  be  made  without 
further  advertisement,  other  than  a  general  notice  of  such 
postponement,  to  be  published  in  the  City  Record  and  the 
corporation  newspapers. 

§  16.  Section  ten  hundred  and  thirty  of  said  law  is  hereby 
renumbered  so  as  to  be  section  ten  hundred  and  twenty-nine  and 
is  amended  so  as  to  read  as  follows : 

SALES  [FOR  TAXES  AND  ASSESSMENTS] 
OF  TAX  LIENS  TO  BE  CONDUCTED  BY 
THE  COLLECTOR  OF  ASSESSMENTS  AND 
ARREARS  [:  PROVISION  FOR  REPAYMENT 
OF  PURCHASE  MONEY  WHEN  THE  SALE  IS 
\^ACATEDJ. 

§  1029.  The  collector  of  assessments  and  arrears  or  his 
assistant  shall  conduct  the  sales  hereinbefore  provided  to  be 
made,  and  no  auctioneer  other  than  said  collector  or  his 
assistant  shall  be  employed  to  make  such  sale,  and  no  auc- 


25 


tioneers'  fees  shall  be  charged  thereon.  The  comptroller  shall 
require  from  each  purchaser  of  a  tax  lien  at  the  time  of  such 
sale  a  deposit  on-  account  of  the  amount  of  the  tax  lien 
purchased  by  him,  and  shall  prescribe  a  time  not  later 
than  thirty  days  from  the  date  of  sale,  zchen  the  balance  shall 
be  paid  to  the  collector  of  assessments  and  arrears,  at  his 
office.  Transfers  of  tax  lien  [certificates  of  sale]  shall  be  made 
and  delivered  to  the  purchaser  without  charge  upon  payment 
of  the  amounts  therein  shown  to  be  due.  [And  all  certificate 
of  sale  not  paid  for  within  thirty  days  following  the  date  of 
sale,  may  be  canceled  by  the  collector  of  assessments  and 
arrears  and  the  sales  relating  thereto  declared  void.  In  case 
any  sale  shall  be  vacated  or  canceled,  the  purchaser,  his  legal 
representative  or  assign,  shall  be  repaid  the  amount  paid  by 
him  at  such  sale,  with  interest  thereon  from  the  time  of  such 
payment.]  In  case  any  purchaser  shall  not  complete  his  pur- 
chase in  accordance  with  the  terms  prescribed  as  herein  provided, 
then  the  amount  deposited  by  him  at  the  time  of  the  sale  shall 
be  forfeited  to  the  city,  and  the  entire  tax  lien  upon  the  lands 
affected  by  such  purchase  shall  be  sold  again.  Such  resale  shall 
be  held  at  such  time  as  the  comptroller  may  direct  and  shall  be 
advertised  in  the  City  Record  and  the  corporation  ne2i*spapers. 
in  such  manner  and  for  such  time,  not  less  than  tzi'o  zi'eeks,  as 
the  comptroller  may  direct.  All  deposits  forfeited  as  aforesaid 
shall  be  paid  into  the  General  Fund  of  the  City  of  Ne^v  York. 

§  17.  Sections  ten  hundred  and  thirty-one  to  ten  hundred  and 
forty-nine,  both  inclusive,  of  said  law  are  hereby  repealed. 

§  18.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  thirty,  and  to  read  as 
follows : 

Transfers  of  Tax  Liens. 

§  1030.  A  transfer  of  tax  lien  shall  operate  to  transfer  and 
assign  the  tax  lien  upon  the  lands  or  tenements  described  there- 
in for  the  taxes,  assessments  and  water  rents,  and  penalties,  the 
interest  thereon,  and  the  charges  of  the  notices  and  advertise- 


' 


I 

I 


..I 


'14 


fl5 


nient  jriven  pursuant  to  section  ten  hundred  and  twenty-seven  of 
this  act,  and  all  other  costs  and  charges,  so  advertised  for  sale, 
free  of  all  taxes,  assessments  and  water  rents,  constituting  such 
tax  lien,  which  were  mentioned  in  such  advertisement  of  sale, 
but  subject  to  the  lien  for  and  right  of  the  city  to  collect  and  re- 
ceive all    taxes,    assessments    and   water    rents   which   accrued 
or  which  became  a  lien  after  the  day  of  the  first  advertisement 
of  such  sale.    A  transfer  of  tax  lien  shall  contain  a  transfer  and 
assignment  by  the  city  of  the  tax  lien  sold  to  the  purchaser,  the 
date  of  the  sale,  the  aggregate  amount  of  the  tax  len  so  trans- 
ferred, and  of  the  items  of  taxes,  assessments,  water  rents,  penal- 
ties, and  interest  composing  the  tax  lien,  the  annual  rate  of  in- 
terest which  the  purchaser  has  bid  and  will  be  entitled  to  receive, 
the  date  when  the  amount  of  the  tax  lien  will  be  due,  and  a 
description  of  the  real  property  affected  by  the  tax  lien,  which 
description  shall  include  the  name  of  the  borough  in  which 
the  property  lies  and  shall  refer  for  certainty  to  the  designa- 
tion of  said  lot  on  the  tax  map,  by  its  lot  number  and  the 
number  of  the  block,  ward  or  section  in  which  it  is  contained, 
and   such   other   identifying  description   as   the   collector   of 
assessments  and  arrears  may  deem  proper  to  add.   Each  transfer 
of  tax  lien  shall  be  subscribed  by  or  in  behalf  of  the  collector  of 
assessments  and  arrears,  making  the  sale  or  a  successor  in 
office  of  such  collector,  and   shall  be  acknowledged  by  the 
officer  subscribing  the  same  in  the  manner  in  which  a  deed 
is  required  to  be  acknowledged  to  be  recorded  in  the  county 
in  which  the  real  property  affected  is  situated. 

§  19.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section  to  be  section  ten  hundred  and  thirty-one  and  to  read 
as  follow^s: 

Record  of  Transfers  of  Tax  Liens. 

§  1031.  The  collector  of  assessments  and  arrears  shall 
keep  in  his  office  a  public  record  of  sales  of  tax  liens,  and  a 
copy  of  each  transfer  of  tax  lien  issued  by  him.     A  transfer 


I 


27 

of  tax  lien  and  an\-  assignment  thereof,  duly  acknowledged,  shall 
be  deemed  conveyances  under  Article  MIL  of  the  Real  Prop- 
erty Law,  and  may  be  recorded  in  the  office  of  the  recording 
officer  of  any  county  in  which  the  real  property  which  it  affects 
is  situated.  Transfers  of  tax  lien  and  all  assignments  thereof 
shall  be  recorded  by  recording  officers  in  the  same  manner  as 
mortgages  and  assignments  thereof,  but  without  payment  of 
tax  under  Article  XIV.  of  the  Tax  Law.  The  record  in  the 
office  of  the  collector  of  assessments  and  arrears  of  sales  of  tax 
liens,  of  a  transfer  of  tax  lien,  and  of  a  copy  of  a  transfer  tax 
lien ;  a  record  of  a  transfer  tax  lien  in  the  office  of  a  recording 
officer,  and  of  an  assignment  of  tax  lien,  duly  acknowledged,  in 
the  office  of  a  recording  officer,  shall  each  be  evidence  in  any  court 
in  the  state  without  further  proof.  A  transcript  of  any  record 
enumerated  in  this  section,  duly  certified  shall  be  evidence  in  any 
court  in  the  state  with  like  effect  as  the  original  instrument  of 
record.  Neither  the  tax  lien  nor  the  rights  transferred  by  a 
transfer  tax  lien  shall  be  impaired  by  failure  to  record  the  trans- 
fer of  tax  lien  in  the  office  of  a  recording  officer.  Unless  a  con- 
trary intent  appears  a  tax  lien  shall  be  presumed  to  be  merged 
with  the  title  of  the  owner  in  fee  simple  of  the  lands  or  tene- 
ments described  therein  whenever  it  shall  appear  from  recorded 
instruments  that  the  tax  lien  has  been  transferred  or  assigned  to 
the  owner  of  such  lands  or  tenements,  notwithstanding  other 
intervening  estates  or  liens. 

§  20.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-two,  and  to  read 
as  follows: 


f 

\ 

4 

i 


Rights  of  Purchaser  of  Tax  Lien. 

§  1032.  The  aggregate  amount  of  each  tax  lien  trans- 
ferred pursuant  to  this  title,  shall  be  due  three  years  from  the 
date  of  the  sale.  Until  such  aggregate  amount  is  fully  paid 
and  discharged,  the  holder  of  the  transfer  of  tax  lien  shall  be 


I  I 

III 

i  ■      : 

I 

ill 


\^   i 


m    t 


28 

entitled  to  receive  interest  on  such  ag^^regate  amount  from  the 
day  of  sale,  semi-annually  on  the  first  day  of  January  and  July,  at 
the  rate  which  the  purchaser  shall  have  bid.  At  the  option  of  the 
holder  of  any  transfer  of  tax  lien  the  aggregate  amount  thereof 
shall  become  due  and  payable  after  default  in  the  ])ayment  of 
interest  for  thirty  days  or  after  default  for  six  months  after  the 
delivery  of  transfer  tax  lien  in  the  payment  of  any  taxes,  assess- 
ments or  water  rents,  which  become  a  lien  after  the  day  of  the 
first  advertisement  of  the  sale  of  the  tax  lien  transferred  by 
such  transfer  of  tax  lien.  Any  person  having  a  legal  or  bene- 
ficial interest  in  property  affected  by  a  transfer  of  tax  lien  may 
discharge  the  same  before  maturity  after  giving  thirty  days'  no- 
tice in  writing  to  the  holder  thereof,  upon  payment  of  the  prin- 
cipal with  interest  at  the  rate  bid  to  the  next  succeeding  interest 
day,  or  any  such  person  may  pay  to  the  collector  of  assessments 
and  arrears  such  principal  with  interest  at  the  rate  bid  up  to 
a  day  one  month  after  the  next  interest  day.  In  case  such  pay- 
ment be  made  to  the  collector  of  assessments  and  arrears  he 
shall  receive  the  same  for  the  benefit  of  the  holder  of  the  tax 
lien  thus  discharged,  and  shall  give  notice  thereof  to  the  pur- 
chaser or  the  personal  representative  or  assignee  of  the  pur- 
chaser, by  mail  addressed  to  such  address  as  may  have  been  fur- 
nished to  the  collector  of  assessments  and  arrears.  Upon  re- 
ceiving surrender  of  such  transfer  of  tax  lien  the  collector  of 
assessments  and  arrears  shall  pay  to  the  person  entitled  thereto 
the  amount  thus  deposited. 

§  21.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-three,  and  to 
read  as  follows: 


Discharge  of  Tax  Lien. 

§  1033.  A  tax  lien  sold  pursuant  to  the  provisions  of  this 
title  must  be  discharged  upon  the  record  thereof  by  the  col- 
lector  of  assessments  and   arrears   when   payment   is   made   to 


29 


him  of  the  principal  interest  and  interest  as  provided  in  the 
last  preceding  section,  and  also  when  the  transfer  of  tax 
lien  is  surrendered  to  him  for  cancellation  and  there  is  pre- 
sented to  him  a  certificate  executed  by  the  purchaser,  or  the 
personal  representative  or  assignee  of  the  purchaser,  acknowl- 
edged so  as  to  be  entitled  to  be  recorded  in  the  county  in 
which  the  real  property  affected  by  such  tax  lien  is  situated, 
certifying  that  the  tax  lien  has  been  paid  or  has  been  otherwise 
satisfied  and  discharged.  The  transfer  of  tax  lien  thus  surrend- 
ered and  such  certificate  of  discharge  must  be  filed  by  the  collector 
of  assessments  and  arrears  and  he  must  note  upon  the  margin 
of  the  record  of  such  sale,  upon  such  transfer  of  tax  lien  and 
upon  the  copy  of  the  transfer  of  tax  lien  kept  in  his  office  a 
minute  of  such  discharge  and  the  date  of  filing  thereof.  If 
the  transfer  of  tax  lien  shall  have  been  lost  or  destroyed  or  muti- 
lated, application  for  an  order  dispensing  with  the  production  of 
the  transfer  of  tax  lien  may  be  made  in  the  same  manner  as  is  pro- 
vided in  section  two  hundred  and  seventy-a  of  the  Real  Property 
Law,  the  provisions  of  which  so  far  as  the  same  may  be  are 
hereby  made  applicable  to  discharge  of  tax  liens.  The  collector  of 
assessments  and  arrears  shall  upon  demand  issue  his  certificate 
showing  the  discharge  of  any  tax  lien  which  may  have  been  duly 
discharged  as  provided  in  this  section,  and  such  certificates  may 
be  filed  in  any  office  where  the  transfer  of  tax  lien  is  recorded, 
and  any  recording  officer  with  whom  such  a  certificate  is  filed, 
shall  record  the  same,  and  upon  the  margin  of  the  record  of  such 
transfer  of  tax  lien  in  his  office  shall  note  a  statement  that  the 
same  has  been  discharged  and  a  reference  to  the  record  of  such 
certificate  in  his  office. 


§  22.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-four,  and  to  read 
as  follows: 

Exemption  from  Taxation. 

§  1034.  Tax  liens  and  transfers  of  tax  liens  shall  be 
exempt  from  taxation  by  the  state  or  any  local  subdivisions 


30 


ii 


llr 


'if 


thereof,  except  from  the  taxes  imposed  by  article  ten  of  the  tax 
law.  The  real  property  affected  by  any  tax  lien  shall  not  be 
exempt  from  taxation  by  reason  of  this  section. 

§  2^.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-five,  and  to  read 
as  follows : 

Foreclosure  of  Tax  Lien. 

§  1035.  If  the  amount  of  any  tax  lien  which  shall  have 
been  transferred  by  a  transfer  of  tax  lien  shall  not  be  paid 
when  under  its  terms  and  the  provisions  of  this  title  such 
amount  shall  be  due,  the  holder  of  such  tax  lien  may  maintain  an 
action  in  the  Supreme  Court  to  foreclose  such  tax  lien.  In  an 
action  to  foreclose  a  tax  lien  any  person  shall  be  a  proper  party 
of  whom  the  plaintiff  alleges  that  such  person  has  or  may  have 
or  that  the  plaintiff  has  reason  to  believe  that  such  person  has  or 
may  have,  an  interest  in  or  claim  upon  the  real  property  affected 
by  the  tax  lien.  Except  as  otherwise  provided  in  this  title  an 
action  to  foreclose  a  tax  lien  shall  be  regulated  by  the  provisions 
of  the  Code  of  Civil  Procedure  and  by  all  other  provisions  of 
law,  and  rules  of  practice  applicable  to  actions  to  foreclose  mort- 
gages on  real  property.  The  People  of  the  State  of  New  York 
may  be  made  party  to  an  action  to  foreclose  a  tax  lien  in  the  same 
manner  as  a  natural  person. 

§  24.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-six,  and  to  read 
as  follows: 

Pleading  Transfer  of  Tax  Lien. 

§  1036.  Whenever  a  cause  of  action,  defense  or  counter- 
claim, is  for  the  foreclosure  of  a  tax  lien,  or  is  in  any  manner 
founded  upon  a  tax  lien  or  a  transfer  of  tax  lien,  if  in  any 
pleading  or  petition,  there  be  set  forth  a  copy  of  a  transfer  of 
tax  lien,  together  with  a  statement  of  the  time  and  place  of  the 
recording  thereof  in  the  office  of  the  collector  of  assessments  and 


I 

t 


3J 

arrears  or  in  any  other  public  office,  it  shall  not  be  necessary  to 
plead  or  prove  any  act,  proceeding,  notice  or  action  preceding 
the  issue  of  such  transfer  of  tax  sale,  nor  to  establish  the  validity 
of  the  tax  lien  transferred  by  such  transfer  of  tax  lien.  If  a 
party  or  person  in  interest  in  any  such  action  or  proceeding 
claims  that  a  tax  lien  is  irregular  or  invalid,  or  that  there  is  any 
defect  therein  or  that  a  transfer  of  tax  is  irregular,  invalid  or 
defective,  such  invalidity,  irregularity  or  defect  must  be  specifi- 
cally pleaded  or  set  forth,  and  must  be  established  affirmatively 
by  the  party  or  person  pleading  or  setting  forth  the  same. 

§  25.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-seven,  and  to 
read  as  follows : 

Judgment  Upon  Tax  Lien. 

§  1037.  In  every  action  for  the  foreclosure  of  a  tax  lien, 
and  in  every  action  or  proceeding  in  which  a  cause  of  action, 
defense  or  counterclaim  is  in  any  manner  founded  upon  a  tax 
lien  or  a  transfer  of  tax  lien,  such  transfer  of  tax  lien  and  the 
tax  lien  which  it  transfers  shall  be  presumed  to  be  regular 
and  valid  and  effectual  to  transfer  to  the  purchaser  named 
therein  a  valid  and  enforcible  tax  lien.  Unless  in  such  an 
action  or  proceeding  such  tax  lien  or  transfer  of  tax  lien  be 
found  to  be  invalid  it  shall  be  lawful  in  any  interlocutory  or 
final  judgment,  or  any  final  order  entered  therein,  to  adjudge 
that  a  tax  lien  transferred  by  a  transfer  of  tax  lien  pleaded  or  set 
forth  as  provided  in  section  ten  hundred  and  thirty-six,  or  a  tax 
lien  established  or  proved  in  any  other  manner  to  the  satisfaction 
of  the  court,  is  a  valid  lien  upon  all  or  part  of  the  real  property 
which  it  purports  to  affect,  and  that  the  transfer  of  tax  lien  trans- 
ferring the  same  is  effectual  to  transfer  such  tax  lien  to  the  pur- 
chaser named  therein. 


4 

I 


*  . 


II 


i;  1 


il 


if  • 


in 


I 


f 


f 


33 

§  26.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-eight,  and  to 
read  as  follows : 

Judgment  of  Foreclosure  of  Tax  Lien. 

§  1038.  In  an  action  to  foreclose  a  tax  lien,  unless  the 
defendants  obtain  judgment,  the  plaintiff  shall  be  entitled  to 
a  judgment  establishing  the  validity  of  the  tax  lien  so  far  as  the 
same  shall  not  be  adjudged  invalid  and  of  the  transfer  of  tax  lien, 
and  directing  the  sale  of  the  real  property  affected  thereby,  or 
such  part  thereof  as  shall  be  sufficient  to  discharge  the  tax  lien, 
or  such  items  thereof  as  shall  not  be  adjudged  invalid,  and  all 
other  accrued  taxes,  assessments  and  water  rents  affecting 
the  real  property,  together  with  the  expenses  of  the  sale,  and  the 
costs  of  the  action. 

§  2y.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-nine,  and  to 
read  as  follows: 

Effect  of  Judgment  Foreclosing  Tax  Lien. 

§  1039.  Every  final  judgment  in  an  action  to  foreclose  a  tax 
lien  shall  be  binding  upon,  and  every  conveyance  upon  a  sale 
pursuant  thereto,  shall  transfer  to  and  vest  in  the  purchaser  all 
the  right,  title,  interest  and  estate  in  and  claim  upon  the  real 
property  affected  by  such  judgment,  of,  the  plaintiff,  each  de- 
fendant, whether  individual  or  trustee,  upon  whom  the  summons 
is  served,  each  person  claiming  from,  through  or  under  such  a 
defendant  by  title  accruing  after  the  filing  of  notice  of  pendency 
of  the  action  or  after  the  entry  of  judgment  and  filing  of  the 
judgment  roll  in  the  proper  county  clerk's  office,  and  each  person 
not  in  being  when  the  judgment  is  rendered,  who  afterwards 
may  become  entitled  to  a  beneficial  interest  attaching  to,  or  an 
estate  or  interest  in  such  real  property  or  any  portion  thereof, 
provided  that  the  person  first  entitled  to  such  beneficial  interest, 
estate  or  interest  is  a  party  to  such  action  or  bound  by  such  judg- 
ment.    So  much  of  section  four  hundred  and  forty-five  of  the 


33 


Code  of  Civil  Procedure  as  requires  the  court  to  allow  a  defend- 
ant to  defend  an  action  after  final  judgment  shall  not  apply  to 
an  action  to  foreclose  a  tax  lien.  Delivery  of  the  possession  of 
real  property  affected  by  a  judgment  to  foreclose  a  tax  lien  may 
be  compelled  in  the  manner  prescribed  in  section  sixteen  hundred 
and  seventy-five  of  the  Code  of  Civil  Procedure. 

§  28.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty,  and  to  read 
follows : 

Surplus. 

§  1040.  Any  surplus  of  the  proceeds  of  the  sale,  after  pay- 
ing the  expenses  of  the  sale,  and  all  taxes,  assessments  and  water 
rents  which  accrued  or  became  a  lien  after  the  day  of  the  first 
advertisement  of  the  sale  under  which  the  foreclosed  transfer  of 
tax  lien  was  issued,  and  satisfying  the  amount  of  the  tax 
lien  and  interest  and  the  costs  of  the  action,  must  be  paid 
into  court,  for  the  use  of  the  person  or  persons  entitled  thereto. 
If  any  part  of  the  surplus  remains  in  court  for  the  period  of 
three  months,  and  no  application  has  been  made  therefor,  the 
court  must,  and,  if  an  application  therefor  is  pending,  the  court 
may  direct  such  surplus  to  be  invested  at  interest,  for  the  bene- 
fit of  the  person  or  persons  entitled  thereto,  to  be  paid  upon 
the  direction  of  the  court. 

§  29.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-one,  and  to  read 
as  follows: 

Foreclosed  Tax  Lien  Not  Arrears. 

§  1041.  Any  party  to  an  action  to  foreclose  a  tax  lien  or 
any  purchaser  or  any  party  in  interest  may  give  notice  of  such 
foreclosure  to  the  collector  of  assessments  and  arrears,  and  after 
such  notice  the  items  which  constituted  the  tax  lien  thus  fore- 
closed shall  not  be  entered  by  the  collector  of  assessments  and 
arrears  in  any  yearly  assessment  roll,  so  long  as  the  judgment 
of  foreclosure  of  such  lien  remains  in  force. 


J 


1 


54^ 


II 


il 

■  /I. 

\ 

■Y 


§  30.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-two,  and  to  read 
as  follows: 

Procedure  When  No  Bid  for  a  Tax  Lien  is  Received. 

§  1042.     If  no  bid  be  received  for  a  tax  lien  on  any  parcel 
of  property  at  a  duly  advertised  sale  and  it  shall  appear  to  the 
comptroller  that  the  taxes,  assessments,  water  rents,  penalties 
and  accrued  interest  amount  to  so  large  a  proportion  of  the 
value  of  the  property  that  the  security  is  insufficient  to  attract 
bidders,  then  and  in  that  event  the  comptroller  and  the  cor- 
poration counsel  shall  investigate  the  facts  and  may  fix  a  lesser 
amount  for  which  in  their  judgment  a  tax  lien  bearing  twelve 
per  centum  interest  can  be  sold.     A   certificate  in  writing, 
signed  by  them,  shall  be  filed  with  the  collector  of  assessments 
and  arrears,  setting  forth  the  amount  so  determined  by  them, 
together  with  a  brief  statement  of  the  reasons  for  such  reduc- 
tion, which  certificate  shall  include  the  total  amount  of  the 
taxes,  assessments,  water  rents,  penalties  and  accrued  interest, 
the  assessed  value  of  such  parcel  of  real  estate,  and  the  value 
of  the  land  as  the  same  appears  on  the  last  preceding  assess- 
ment roll.    Thereafter  such  reduced  amount  shall  constitute  the 
tax  lien  upon  said  real  property  for  the  items  therein  enumerated, 
which  reduced  amount  shall  bear  interest  at  the  rate  of  seven 
per  cent,  per  annum  from  the  date  of  such  certificate  until  fully 
paid,  or  until  the  tax  lien  thus  fixed,  together  with  the  lien  for 
any  other  taxes,  assessments,  water  rents,  and  penalties  and  in- 
terest becoming  liens  thereafter  shall  be  sold.     The  collector  of 
assessments  and  arrears  shall  forthwith  advertise  the  tax  lien 
for  such  reduced  amount  for  sale  to  the  highest  bidder  in  the 
manner  provided  for  the  advertisement  for  t,he  sale  of  ordinary 
tax  liens.    Such  tax  lien  shall  bear  interest  at  twelve  per  centum 
and  shall  be  sold  to  the  person  bidding  the  highest  amount  of 
money  in  excess  of  the  reduced  amount  so  fixed  by  the  comp- 
trolki    and   corporation   counsel,   provided  that   if   the   bidding 


35 


reaches  the  original  amount  of  the  tax  lien  on  the  real  property 
aflfected,  the  sale  shall  proceed  in  the  manner  provided  in  sec- 
tion ten  hundred  and  twenty-nine.  If  no  bid  shall  be  received 
at  such  sale,  the  comptroller  and  corporation  counsel  shall  re- 
consider their  determination  and  may  file  a  new  certificate  in 
the  manner  hereinbefore  provided,  and  the  collector  of  assess- 
ments and  arrears  shall  proceed  again  as  hereinbefore  directed. 
Such  procedure  shall  be  repeated  until  a  tax  lien  for  such  taxes, 
assessments,  water  rents  and  accrued  interest  shall  be  sold. 

§  31.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-three,  and  to  read 
as  follows: 

Reimbursement  for  Defective  Tax  Liens  or  Transfers  of 

Tax   Liens. 

§  1043.  I^  ^  transfer  of  tax  lien  be  vacated  or  be  set  aside 
or  canceled,  or  if  it  be  adjudged  in  any  action  that  a  transfer  of 
tax  lien  is  invalid  or  defective,  or  not  sufficient  to  transfer  a 
tax  lien  to  the  purchaser  thereof,  or  if  in  any  action  to  fore- 
close a  tax  lien,  it  be  adjudged  that  the  entire  tax  lien  is  void 
and  not  a  valid  lien  on  the  premises  which  it  purports  to  afifect, 
and  that  the  complaint  be  dismissed,  the  purchaser  may  surrender 
such  transfer  of  tax  lien  to  the  collector  of  assessments  and 
arrears  and  thereupon  shall  be  repaid  by  the  city  the  amount 
paid  for  such  transfer  of  tax  lien,  with  interest  from  the  time 
of  such  payment  at  the  rate  set  forth  in  the  transfer  of  tax 
lien,  and  the  city  shall  pay  the  taxed  costs  and  disbursements 
of  any  action  or  proceeding  in  which  such  adjudication  is 
made. 

§  32.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  forty-four,  and  to 
read  as  follows: 

Reimbursement  When  Part  of  Tax  Lien  Is  Defective. 
§   1044.     If,  in  any  action  to  foreclose  a  tax  lien,  it  shall  be 
adjudged  that  some,  but  not  all  of  the  items  constituting  such 


ti 


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ff 


I'f    , 


I 


36 

tax  lien  arc  void  and  not  a  valid  lien  on  the  premises  covered 
by  such  tax  lien,  or  if  in  any  action  or  i^roceeding-  it  be  ad- 
judged that  a  transfer  of  tax  lien  is  invalid  or  defective,  as  to 
some  tliough  not  as  to  all  of  the  items  transferred,  the  holder 
of  the  transfer  of  tax  lien,  by  instrument  in  writing  duly  acknowl- 
edged, shall  retransfer  to  the  city  the  items  thus  affected, 
and  shall  be  repaid  by  the  city  such  portion  of  the  amount  paid 
for  such  transfer  of  tax  lien  as  may  be  applicable  to  the  items 
thus  affected,  with  interest  from  the  time  of  such  payment  at 
the  rate  set  forth  in  the  transfer  of  tax  lien,  and  the  city  shall 
pay  the  taxed  costs  and  disbursements  of  any  action  or  pro- 
ceeding, other  than  an  action  to  foreclose  the  tax  lien,  in 
which  such  adjudication  is  made. 

§  33.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  forty-five,  and  to  read 
as  follows: 

Owners  May  Question  Transfers  of  Tax  Liens. 

§  1045.  Any  person  interested  in  or  holding  a  lien  upon  any 
real  property  affected  by  any  unpaid  tax  lien  or  transfer  of  tax 
lien,  may  file  a  written  notice  with  the  collector  of  assessments 
and  arrears  claiming  that  a  transfer  of  tax  lien  is  invalid  or 
defective  or  that  a  tax  lien  which  has  been  transferred  pur- 
suant to  this  title  or  which  is  advertised  to  be  transferred 
is  invalid,  defective,  void  or  ineffectual,  or  should  be  vacated 
or  set  aside.  The  collector  of  assessments  and  arrears  shall 
transmit  all  such  notices  to  the  corporation  counsel,  who  shall 
examine  into  the  facts  and  proceedings  resulting  in  the  tax 
lien  or  transfer  of  tax  lien  mentioned  in  such  notice ;  before  a 
determination  is  had  the  corporation  counsel  shall  serve  a  copy 
of  such  notice  upon  the  holder  of  the  transfer  of  tax  lien  which 
is  thus  questioned  or  which  transfers  the  items  thus  questioned  ' 
and  shall  give  such  holder  an  opportunity  to  be  heard.  The 
corporation  counsel  shall  certify  in  writing  his  opinion  upon 
the  matters  and  questions  raised  by  such  notice,  and  if  he  con- 


35^ 

eludes  that  a  defense  in  an  action  to  foreclose  the  tax  lien 
would  succeed  in  whole  or  in  part  he  shall  so  certify,  and  shall 
recommend  what  action  shall  be  taken  by  the  city  concerning 
the  same.  If  the  corporation  counsel  concludes  that  such  de- 
fense would  succeed  in  whole  or  in  .part  and  recommends  re- 
payment by  the  city  of  the  amount  paid  for  a  transfer  of  tax 
lien  which  would  be  applicable  to  any  item,  he  shall  state  the 
reasons  for  such  recommendation,  and  if  it  be  approved  by 
the  mayor  and  comptroller  the  city  shall  require  the  surrender 
of  the  transfer  of  tax  lien  or  the  retransfer  to  it  of  the  item  or 
items  of  tax  lien  which  are  found  to  be  void  or  defective,  and 
shall  make  repayment  therefor  in  the  same  manner  as  if  such 
transfer  of  tax  lien,  tax  lien  or  items  had  been  adjudicated  in 
the  manner  provided  in  sections  ten  hundred  and  forty-three 
and  ten  hundred  and  forty-four. 

§  34.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-six,  and  to  read 
as  follows: 

Corporation  Counsel  to  Protect  Interest  of  City. 

§  1046.  No  claim  shall  be  made  against  the  city  under 
sections  ten  hundred  and  fort}-three,  ten  hundred  and  fort\-four 
or  ten  hundred  and  forty-five,  unless  action  to  foreclose  the  tax 
lien  or  transfer  of  tax  lien  upon  which  such  claim  is  founded 
be  commenced  within  five  years  from  the  time  of  the  sale 
resulting  in  such  transfer  of  tax  lien.  Xor  shall  any  claim  be 
made  against  the  city  under  sections  ten  hundred  and  forty-three 
or  ten  hundred  and  forty-four,  unless  within  ten  days  after  the 
commencement  of  any  action  or  proceeding  to  vacate,  set  aside  or 
cancel  a  transfer  of  tax  lien,  or  a  tax  lien  or  an  item  mentioned  in 
a  transfer  of  tax  lien,  or  unless  within  ten  days  after  the  service 
of  any  pleading  or  other  paper  in  an  action  or  proceeding  in  which 
any  transfer  of  tax  lien;  or  item  mentioned  in  a  transfer  of  tax 
lien,  is  brought  into  question,  sought  to  be  set  aside,  vacated, 
or  canceled,  or  -which  sets  forth  or  pleads  any  defense  to  an 


I 


.11 


38 

action  to  foreclose  a  tax  lien,  a  notice  in  writing  be  served 
upon  the  corporation  counsel  setting  forth  the  question  or 
objection  raised  to  the  best  knowledge  of  the  holder  of  the 
transfer  of  tax  lien,  or  his  attorney  at  law,  and  demanding 
that  the  city  take  up  the  prosecution  or  defense  of  the  action 
or  proceeding.  All  proceedings  in  such  action  or  proceeding 
shall  be  stayed  for  thirty  days  or  such  shorter  time  as  the 
corporation  counsel  shall  stipulate  in  writing.  It  shall  be  the 
duty  of  the  corporation  counsel  to  examine  the  questions 
raised,  and,  in  order  to  protect  the  interests  of  the  city,  he 
shall  have  the  right  to  be  substituted  for  the  attorney  of 
record  of  the  holder  of  the  transfer  tax  lien,  or  to  appear  as 
attorney  of  record  for  the  holder  of  any  such  transfer  of  tax 
lien,  to  conduct  or  defend  any  such  action  or  proceeding  in  the 
name  of  the  holder  of  the  transfer  of  tax  lien,  and  to  bring  any 
other  action  or  proceeding  for,  on  behalf  of  and  in  the  name  of 
the  holder  of  such  transfer  of  tax  lien  as  he  may  deem 
advisable,  to  take  appeals,  and  to  argue  appeals  taken  by  the 
adverse  party,  as  he  may  deem  advisable.  It  shall  be  the  duty 
of  the  corporation  counsel  to  protect  the  interest  of  the  city 
in  all  matters,  actions  and  proceedings  relating  to  tax  liens 
and  transfers  of  tax  liens ;  to  intervene  on  behalf  of  the  city 
or  of  the  holder  of  a  transfer  of  tax  lien  in,  or  to  make  the  city 
a  party  to  any  action  in  which  he  believes  it  to  be  to  the 
interest  of  the  city  so  to  do,  by  reason  of  any  matter  arising 
under  or  relating  to  any  tax  lien  or  transfer  of  tax  lien,  or 
advertisement  of  sale  of  tax  liens.  In  any  action  or  proceeding 
in  which  the  corporation  counsel  pursuant  to  this  section  shall 
be  substituted,  or  shall  appear,  it  shall  be  without  expense  to 
the  holder  of  the  transfer  of  tax  lien,  and  all  costs  recovered  on 
behalf  of  such  holder  of  a  transfer  of  tax  lien  in  any  action  or 
proceeding  conducted  or  defended  by  the  corporation  counsel 
shall  belong  to  the  city  and  shall  be  collected,  applied  and  dis- 
posed of  in  the  same  manner  as  are  other  costs  recovered  by  the 
city. 


39 

§  35.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-seven,  and  to  read 
as  follows : 

Defective  or  Invalid  Transfer  of  Tax  Lien  ;  Proceeding 

Anew. 

§  1047.  If  a  transfer  of  tax  lien  be  vacated  or  be  set 
aside  or  canceled  or  it  be  adjudged  that  a  transfer  of  tax 
lien  is  invalid  or  defective,  or  insufficient  to  transfer  a  tax 
lien  to  the  purchaser  thereof,  or  if  in  any  action  to  foreclose  a 
tax  lien,  it  be  adjudged  that  a  tax  lien  is  not  a  valid  lien  on  the 
premises  which  it  purports  to  affect,  because  of  some  irregu- 
larity in  the  proceedings  had,  and  if,  in  pursuance  of  any  such 
adjudication  the  purchaser  of  said  transfer  of  tax  lien  shall 
have  surrendered  such  transfer  of  tax  lien  to  the  collector  of 
assessments  and  arrears  and  shall  have  been  repaid  by  the 
city,  the  amount  paid  for  such  transfer  of  tax  lien,  w^ith  in- 
terest and  costs  and  disbursements  of  the  said  action  or  pro- 
ceeding in  which  such  adjudication  was  made,  then  and  in 
that  event,  the  tax  lien  which  was  purported  to  be  transferred 
and  assigned  in  such  transfer  of  tax  lien  shall  remain  as  a 
valid  lien  upon  the  premises  which  it  affects,  except  to  such 
extent  as  it  may  have  been  adjudged  irregular  or  invalid,  and 
the  collector  of  assessments  and  arrears  shall  proceed  to  sell 
anew,  as  provided  in  section  ten  hundred  and  twenty-seven  of 
this  act,  so  much  of  the  said  tax  lien  as  is  not  invalid  as  if  no 
prior  sale  purporting  to  transfer  the  said  tax  lien  had  taken  place. 

§  36.  Section  ten  hundred  and  fifty  of  said  law  is  hereby 
renumbered  so  as  to  be  section  ten  hundred  and  forty-eight, 
and  amended  so  as  to  read  as  follows : 

Lost    [CertificateJ    Transfer    of    Tax    Lien      Delivery    of 
[Lease]  Duplicate  in  Case  Of. 

§  1048.  Whenever  any  [certificate]  transfer  of  tax  lien 
given  by  the  collector  of  assessments  and  arrears,  as  in  this 


i 


40 

title  provided,  [of  land  sold]  shall  be  lost,  the  [saidj  comp- 
troller may  receive  evidence  of  such  loss,  and  on  satisfactory 
proof  of  the  fact  may  direct  the  collector  of  assessments  and 
arrears  to  execute  and  deliver  a  [lease]  duplicate  to  such  per- 
son or  persons  who  shall  appear  entitled  thereto  [of  the  lands 
and  tenements  described  in  the  certificate],  and  may  also,  in 
his  discretion,  require  a  bond  of  indemnity,  to  The  City  of 
New  York.  [Each  certificate  shall  be  registered  in  the  record 
of  sales  to  be  kept  in  the  bureau  of  said  collector  of  assess- 
ments and  arrears,  and  no  transfer  of  such  certificate  shall  be 
valid  until  registered  in  said  book.] 

§  37.  Section  ten  hundred  and  fifty-one  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  forty- 
nine,  and  amended  so  as  to  read  as  follows : 

Bills  of  Arrears  of  Taxes  and  Assessments  to  be  Fur- 
nished When  Requested. 

§  1049.  The  collector  of  assessments  and  arrears,  upon 
the  requisition  of  any  person,  shall  furnish  a  bill  of  all  arrears 
of  taxes,  and  of  taxes  with  the  "  water  rents  "  added  on  any 
lot  or  lots  due  prior  to  the  first  of  June,  then  last  past,  and  of 
assessments  which  are  due  and  payable  [including  the  amount 
necessary  to  redeem  it  or  them,  if  it  or  they  have  been  sold 
for  any  arrears  of  assessments,  taxes  or  water  rents  and  be 
yet  redeemable] ;  and  upon  the  payment  of  the  said  bill  (which 
shall  be  called  a  "  bill  of  arrears  and  assessments,  taxes  and 
water  rents,'*)  [and  for  redemption]  his  receipt  thereon, 
countersigned  by  the  comptroller,  shall  be  conclusive  evidence 
of  such  payment.  The  comptroller  shall  cause  to  be  kept  a 
duplicate  account  of  amounts  so  collected,  and  the  certificate 
of  the  collector  of  assessments  and  arrears,  countersigned  by 
the  comptroller,  that  there  are  no  [such]  tax  liens  on  said  lot  or 
lots,  shall  forever  free  the  said  lots  from  all  liens  of  taxes  or 
for  taxes  with  water  rates  added,  or  for  rents  of  water  added 
to  the  taxes  prior  to  the  first  of  June  then  last  past,  and  for 


41 

all  assessments  due  and  payable  prior  to  the  date  of  the  said 
receipt  or  certificate,  but  not  from  the  lien  of  any  tax  lien 
duly  sold  [and  from  all  liens  in  consequence  of  sales  for 
assessments,  taxes,  or  water  rents,  or  for  all  of  them,  when 
the  time  allowed  by  law  for  redemption  had  not  expired  at  the 
date  or  time  of  said  payment  or  certificate]. 

§  38.  Section  ten  hundred  and  fifty-two  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  fifty. 

§  39.  Section  ten  hundred  and  fifty-three  of  said  law  is 
hereby  repealed. 

§  40.  Section  ten  hundred  and  fifty-four  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  fifty- 
one. 

§  41.  This  act  shall  not  affect  or  impair  any  act  done  or 
right  accruing,  accrued  or  acquired,  nor  any  penalty  or  for- 
feiture incurred  prior  to  the  time  when  this  act  takes  effect, 
by  virtue  of  any  section  of  the  Greater  New  York  Charter 
repealed,  amended  or  modified  by  this  act;  but  such  right, 
penalty,  or  forfeiture,  may  be  asserted,  enforced,  prosecuted 
or  inflicted  as  fully  and  to  the  same  extent  as  if  this  act  had 
not  been  passed  or  said  sections  had  not  been  amended, 
repealed  or  modified ;  no  tax  lease  heretofore  issued  nor  any 
tax  sale  heretofore  made  shall  be  affected  by  this  act,  but  the 
rights  of  all  persons,  with  respect  thereto,  shall  be  the  same 
as  if  this  act  had  not  been  passed,  and  all  actions,  suits,  pro- 
ceedings or  prosecutions  under  the  sections  of  Title  5  of 
Chapter  XVII.  of  the  Greater  New  York  Charter  hereby 
amended,  repealed  or  modified  and  pending  when  this  act 
takes  effect  may  be  prosecuted  and  defended  to  final  effect  in 
the  same  manner  as  they  might  prior  to  the  time  when  this 
act  takes  effect. 

§  42.     This  act  shall  take  effect  January  first,  1909. 


I 


■  •<' 


42 

Tax  Liens  Made  Legal  Investments  for  Savings  Banks. 

In  order  that  there  may  be  as  wide  a  market  as  possible 
for  the  sale  of  tax  liens,  it  is  proposed  that  they  shall  be  a  legal 
investment  for  savings  banks,  the  following  bill  is,  therefore, 
proposed  to  accomplish  this  object: 

An  Act  to  amend  the  Banking  Law  by  providing  that  tax 
liens  of  The  City  of  New  York  shall  be  lawful  invest- 
ments for  savings  banks. 

The  People  of  the  State  of  New  York,  represented  in  Senate 
mvd  Assembly,  do  efiact  as  follozvs: 

§  I.  Subdivision  four  of  section  one  hundred  sixteen 
of  chapter  six  hundred  eighty-nine  of  the  Laws  of  eighteen 
hundred  and  ninety-two,  being  chapter  thirty-seven  of  the 
General  Laws,  as  amended  by  chapter  three  hundred  twenty- 
eight  of  the  Laws  of  nineteen  hundred  and  three,  is  hereby 
amended  so  as  to  read  as  follows : 

4.  In  transfers  of  tax  liens  of  the  City  of  Nezv  York  zi'here 
The  amount  of  tax  liens  doelj^xceed  half  the  assessed  value  oj\ 
the  real  property  encumbered  thereby,  in  the  stocks  or  bonds 
of  any  city,  county,  town  or  village,  school  district  bonds  and 
union  free  school  district  bonds  issued  for  school  purposes, 
or  in  the  interest  bearing  obligations  of  any  city,  county,  town 
or  village  of  this  state,  issued  pursuant  to  the  authority  of 
any  law  of  the  state,  for  the  payment  of  which  the  faith  and 
credit  of  the  municipality  issuing  them  are  pledged. 

§  2.  This  act  shall  take  effect  the  first  day  of  January,  nine- 
teen hundred  and  nine. 


r 

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I 


II 


Ill 


J) 


It 


ii 


i 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND  REVENUE 


ON 


COLLECTION  OF  ARREARS  OF  REAL  ESTATE 
TAXES  AND  ASSESSMENTS 


DECEMBER  1907. 


New  York  : 

MARTIN  B.  BROWN  COMPANY.  PRINTERS  A\D   SrATIONERS 

Nos.  49  TO  57  Park  Place. 

1907 


i 


}'  * 


;!. 


Ay 


. 


'  if 

! 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance, 


REPORT 


OF 


COMMITTEE  ON  TAXATION 
AND  REVENUE 


ON 


COLLECTION  OF  ARREARS  OF  REAL  ESTATE 
TAXES  AND  ASSESSMENTS 


DECEMBER,  1907. 


New  York  : 

MARTIN  B.  BROWN  COMPANY.  PRINTKRS  AMD  STATIONERS 

Nos.  ^9  TO  57  Park  Pl\ck. 


fi 


■if 


1  y  o  7 


t 


i 


Chairman. 


Edgar  J.  Levey. 


Committee  on  Taxation  and  Revenue. 


Lawson  Purdy, 
Edwin  R.  A.  Seligman, 
Francis  Lynde  Stetson^ 


Morris  K.  Jesup, 
Joseph  Haag^ 
Edward  L.  Hevdecker. 


Committee  on  The  City  Debt  and  Special  Assessments. 


Edward  M.  Shepard, 
John  L.  Cadwalader,, 


Francis  Key  Pendleton, 
Frank  J.  Goodnow. 


Committee  on  Accounting  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild^ 

Herman  Ridder,  John  Crane, 

John  C.  Hertle. 


4 
« 


THE  COLLECTION  OF  ARREARS  OF  REAL  ESTATE 
TAXES  AND  ASSESSMENTS. 

Introduction. 

Long  experience  in  the  Finance  Department  convinced 
Mr.  Joseph  Haag,  when  Chief  Bookkeeper,  that  the  method 
for  the  collection  of  arrears  of  taxes  and  assessments  was 
hopelessly  inadequate.  In  1902  he  presented  to  the  Comp- 
troller an  outline  of  what  he  regarded  as  a  satisfactory  method. 
No  steps  were  taken  to  work  out  this  plan  in  detail  until  a 
year  and  a  half  ago,  when  Mr.  Haag  presented  the  plan  to  Mr. 
Purdy,  Chairman  of  the  Committee  on  Taxation  and  Revenue 
of  the  Mayor's  Advisory  Commission.  Mr.  Purdy  then  pre- 
pared a  rough  draft  of  a  bill  amending  Title  5  of  Chapter 
XVII.  of  the  Charter,  which  was  printed  and  submitted  to  the 
Committee  on  Taxation  and  Revenue.  The  plan  was  so  far 
approved  by  the  Committee  in  principle  that  it  seemed  desir- 
able to  perfect  the  bill.  The  bill  as  prepared  by  Mr.  Purdy 
was  submitted  to  Mr.  Walter  Lindner,  Solicitor  of  the  Title 
Guarantee  and  Trust  Company,  and  he  became  so  much 
interested  in  the  plan  that  he  was  kind  enough  to  volunteer  to 
aid  the  Committee.  Mr.  Lindner  has  now  carefully  revised 
the  bill,  inserting  the  provisions  necessary  to  make  it 
thoroughly  workable,  having  in  view  the  necessity  for  such 
perfection  of  detail  as  will  result  in  the  City  being  able  to 
insure  a  perfectly  good  title  to  the  purchaser  of  real  property 
when  ultimately  sold  for  taxes. 

Mr.  Lindner  has  had  in  mind  also  the  necessity  for  mak- 
ing the  tax  liens  provided  for  in  the  bill  an  attractive  invest- 
ment. The  Committee  has  also  had  the  benefit  of  the  advice 
and  assistance  of  Mr.  Edward  L,  Heydecker,  the  Editor  of 
the  General  Laws  of  New  York,  now  a  member  of  the  Committee. 


il 


HI') 


The  Present  Method. 
The  present  method  of  enforcing  the  payment  of  arrears  of 
real  estate  taxes,  assessments  and  water  rents  is  contained  in 
Title  5  of  Chapter  XVII.  of  the  Charter  and  was  taken,  almost 
without  change,  from  the  Charter  of  the  old  City  of  New  York, 
called  The  Consolidation  Act.  The  plan  in  substantially  its  pres- 
ent form  has  been  in  force  for  many  years.  Briefly  described  it  is 
as  follows: 


\r , 


Taxes,  assessments  and  water  rents  are  liens  upon  the  land 
assessed  and  are  preferred  in  payment  to  all  other  charges.  When 
taxes  or  assessments  are  unpaid  for  three  years  and  water  rents 
for  four  years  it  is  lawful  for  the  Collector  of  Assessments  and 
Arrears,  under  the  direction  of  the  Comptroller,  to  advertise  for 
sale  a  lease  of  the  property  for  the  lowest  term  of  years  at  which 
any  person  shall  offer  to  take  the  same  in  consideration  of  advanc- 
ing the  arrears,  with  interest  at  the  rate  of  seven  per  cent.,  to  the 
time  of  sale.  The  purchaser  of  such  leases  receives  a  certificate 
of  sale  describing  the  property,  the  term  of  the  lease,  the  amount 
of  arrears,  interest,  &c.,  advanced  in  payment  for  the  lease  and  the 
time  when  the  purchaser  will  be  entitled  to  the  lease  of  the  prop- 
erty. If  there  are  no  bids  for  a  lease  of  any  property  offered  for 
sale,  the  City  of  New  York  may  bid  it  in  for  the  city. 


If  no  one  interested  in  the  property  pays  the  amount  mentioned 
in  the  certificate  of  sale  within  two  years  from  the  date  of  the 
certificate,  with  interest  at  the  rate  of  fourteen  per  cent.,  the 
Comptroller  shall  execute  to  the  purchaser  a  lease  of  the  prop- 
erty for  the  term  of  years  for  which  it  has  been  sold.  The  lease 
cannot  be  executed  and  delivered  until  six  months  after  due 
publication  of  a  notice  that  unless  tiic  property  be  redeemed 
by  a  certain  day,  the  lease  will  be  conveyed  tq  the  purchaser. 


Objections  to  the  Sale  of  Leases. 

The  experience  of  the  old  City  of  New  York  with  this  method 
of  enforcing  payment  of  arrears  has  been  that  a  very  small  per 
centage  of  the  property  put  up  for  sale  has  been  bid  for  by  individ- 
uals, the  bulk  of  the  property  being  bid  in  by  the  representatives 
of  the  city,  and  the  amount  realized  from  actual  sales  is  inconsider- 
able. As  the  sole  object  of  the  sale  is  to  realize  the  amount  due 
the  city,  the  whole  object  of  the  plan  is  defeated. 

Because  of  the  small  number  of  bidders,  the  leases  are  very 
long  and  the  risk  to  the  owners  of  property  correspondingly  great 
if  the  lease  should  be  upheld.  Leases  are  sold  for  one  thou- 
.sand  years.  This  is  equivalent  to  the  sale  of  the  fee.  Under 
such  circumstances,  the  owner  of  the  property  would  receive 
nothing,  his  property  would  be  totally  lost  because  he  had  failed 
or  neglected  to  pay  the  city  within  the  time  required  by  law  a  small 
percentage  of  its  value.  In  view  of  this  great  danger  to  owners 
of  property  the  Courts  have  been  exceedingly  vigilant  to  detect 
flaws  in  the  procedure  so  that  it  is  commonly  believed  that  a  valid 
lease  sold  for  arrears  is  almost  unknown.  With  the  value  of  the 
leases  so  utterly  discredited,  it  is  no  wonder  there  are  few  bidders 
and  that  when  leases  are  sold  the  term  of  years  is  abnormally 
long. 

So  poor  has  been  the  result  of  these  sales  of  leases  that 
there  have  been  only  six  such  sales  in  the  last  thirty-two  years. 
The  objections  may  be  summarized  as  follows:  The  expense 
and  the  danger  to  property  owners  is  excessive  and  unreason- 
able. The  City  is  unable  by  the  sale  of  leases  to  collect  its 
revenue  when  it  requires  it. 

Some  persons  have  suggested  that  the  City  of  New  York 
should  adopt  the  remedy  existing  in  the  former  City  of  Brooklyn 
by  the  sale  at  auction  of  the  fee  of  the  property.  Although  this 
method  was  effective  in  enforcing  the  payment  of  arrears,  it  is 


» 


il 


511 


8 

objectionable  because  too  severe  on  property  owners  whose  prop- 
erty may  be  sacrificed  and  because  it  is  difficult  to  convey  good 
title  by  a  sale  for  taxes.  Titles  are  often  clouded  and  purchasers 
being  obliged  to  take  the  risk  of  a  bad  title  do  not  bid  the  full 
value  of  the  property.  ^ 

The  following  plan,  it  is  deemed,  would  be  effective  in  collect- 
ing arrears  promptly  and  at  the  same  time  would  impose  na 
unconscionable  penalties  on  property  owners  and  in  many  cases 
would,  in  fact,  reduce  the  amount  of  interest  they  may  now  be 
required  to  pay. 

The  Remedy. 
To  be  satisfactory  any  method  of  collecting  arrears  of  real 
estate   taxes,   assessments   and   water   rents   must  combine   two 
(jualities : 

The  remedy  must  be  effective  and  enable  the  city  to  collect  ar- 
rears promptly. 

The  remedy  must  cause  property  owners  the  least  possible  in- 
convenience and  risk. 

The  proposed  remedy  is  deemed  to  meet  these  conditions.  It 
is  briefly  described  as  follows : 

As  soon  as  taxes,  assessments  and  water  rents  are  laid,  a  lien 
attaches  to  the  property  in  favor  of  the  city  which  is  prior  to  any 
and  all  other  liens.  When  taxes  or  assessments  are  three  years 
in  arrears,  or  water  rents  four  years,  the  lien  of  all  arrears  which 
shall  have  accrued  up  to  the  day  of  the  first  advertisement  of  sale, 
will  be  sold  at  auction  to  the  person  who  shall  bid  the  lowest  rate 
of  interest  not  exceeding  twelve  per  cent.  Upon  payment  of  the 
purchase  money  a  conveyance  of  the  "tax  lien,"  payable  in  three 
A-ears.  will  be  executed  by  the  city  to  the  purchaser. 

The  city  will  guarantee  the  validity  of  the  lien  so  that  the  only 
risk  taken  by  the  purchaser  will  be  the  sufficient  value  of  the 
property  affected  by  the  lien  and  the  possible  trouble  of  collection. 


"  Transfers  of  tax  liens  "  will  be  registered  in  the  office  of 
the  Collector  of  Assessments  and  Arrears  and  will  be  record- 
able in  the  office  of  the  Register.  The  procedure  for  collection 
will  be  the  same  as  for  the  collection  of  a  mortgage. 

A  "  transfer  of  tax  lien  "  will  provide  that  the  whole  of  the 
principal  sum  which  the  "  transfer  of  tax  lien  "  is  given  to 
secure  shall  become  due  at  the  option  of  the  owner  thereof 
after  default  in  the  payment  of  interest  for  thirty  days  or  after 
default  in  the  payment  of  any  subsequently  accruing  tax,  assess- 
ment or  water  rent  for  six  months.  This  provision  will  very 
nearly  insure  the  continuous  future  payment  of  taxes  and  assess- 
ments, subsequent  to  the  sale  of  a  "tax  lien,"  as  the  owner  of  the 
property  must  pay  or  suffer  the  foreclosure  of  the  "tax  lien." 

Any  person  having  an  interest  in  property  affected  by  a  "tax 
lien"  may  discharge  the  same  before  maturity  on  giving  thirty 
days'  notice  to  the  holder  of  the  transfer  thereof  upon  payment 
of  the  principal  with  interest  to  a  date  three  months  subse{iuent 
to  the  date  of  payment  named  in  the  notice. 

"Tax  liens"  will  be  exempt  from  taxation  and  will  be  made 
legal  investments  for  Savings  Banks  in  case  they  do  not  exceed 
half  the  assessed  value  of  the  property  affected. 

Advantages. 
"Tax  liens"  will  be  a  thoroughly  safe  investment,  being  abso- 
lutely the  first  liens  on  city  real  estate.  "Tax  liens"  for  large  sums 
should  sell  readily  at  a  low  rate  of  interest  and  even  "tax  liens" 
for  small  sums  should  be  a  profitable  investment  and  sell  easily  at 
some  rate  less  than  the  maximum.  It  is  probable  that  some  per- 
sons and  corj>orations  will  undertake  the  purchase  of  "tax  liens" 
as  a  business,  perhaps  issuing  debenture  bonds  thereby  secured. 

If  "tax  liens"  are  readily  salable  the  city  will  no  longer  be  kept 
out  of  the  use  of  its  proper  income.  The  trouble  and  expense  of 
collection  will  be  shifted  from  the  city  to  private  parties. 


I 


n 


II 


lO 


ii 


u  . 


As  the  proceedings  for  foreclosure  will  be  judicial  full  justice 
will  be  done  to  delinquent  owners  and  the  courts  will  be  careful 
to  sustain  the  validity  of  their  own  acts. 

From  the  standpoint  of  the  taxpayer,  the  proposed  plan  has 
the  great  advantage  that,  when  a  tax  is  over  three  years  in  arrears 
all  taxes  and  assessments  then  due  can  be  postponed  for  three  years 
more  upon  payment  of  interest  and  subsequent  taxes.  Moreover, 
the  taxpayer,  if  a  resident,  will  always  get  personal  notice,  and  will 
generally  get  personal  notice  even  if  a  non-resident,  when  any 
action  is  brought  which  might  result  in  the  sale  of  the  property. 

Description  of  the  Bill. 

The  Bill  amends  Chapter  XVII.  of  the  New  York  Charter. 

Section  i  of  the  Bill  amends  the  caption  of  Chapter  XVII., 
by  inserting  the  words,  "  tax  liens  on  "  so  that  Title  5  shall 
read :  "  Sales  of  tax  liens  on  lands  for  taxes,  assessments  and 
water  rents." 

Section  2  of  the  Bill  amends  Charter  Section  909,  chang- 
ing the  definition  of  water  rents,  by  making  it  more  specific. 

Section  3  amends  Charter  Section  920,  as  amended  by 
Chapter  303  of  the  Laws  of  1907,  by  inserting  the  words  "  the 
tax  lien." 

Section  4  amends  Charter  Section  964  by  inserting  the 
words  "  the  tax  lien." 

Section  5  of  the  Bill  amends  the  caption  of  Title  5  so  as 
to  conform  to  the  caption  of  the  Chapter. 

Section  6  amends  Charter  Section  1017  by  more  carefully 
defining  "  water  rents."  This  section  determines  the  time 
when  taxes,  assessments  and  water  rents  become  liens. 

Charter  Sections  1018  and  1019  remain  unchanged.  They 
relate  to  the  publication  of  notice  of  the  confirmation  of  assess- 
ments, and  the  charging  of  interest,  if  assessments  are  unpaid 
after  sixty  days. 


II 

Section  7.  Charter  Section  1020  provides  the  rate  of 
interest  to  be  charged  on  all  arrears  of  taxes  and  assessments. 
The  section  is  amended  to  conform  to  the  sale  of  the  tax  lien 
instead  of  a  lease. 

Section  8  amends  Charter  Section  1021,  by  providing  for 
sale  of  the  tax  lien  for  arrears  of  assessments,  and  provides 
for  apportionment  by  the  Board  of  Assessors  when  parcels  are 
divided. 

Sections  9  and  10  make  slight  verbal  changes  in  Charter 
Sections  1023  and  1024,  otherwise  1022,  1023,  1023a  and  1024 
remained  unchanged.  They  relate  to  water  rents ;  the  return  of 
arrears  to  the  Collector  by  the  Receiver  of  Taxes ;  notifying 
taxpayers  of  assessments  and  provision  for  the  inclusion  of 
water  rents  in  the  assessment  rolls. 

Section  ii  amends  Charter  Section  1025.  This  section 
provides  for  the  record  of  arrears  on  the  assessment  rolls  and 
remains  substantially  unchanged. 

Section  12  amends  Charter  Section  1026.  This  section 
provides  for  notices  of  arrears  to  be  printed  on  tax  bills  and 
is  amended  to  conform  to  the  new  remedy,  so  that  warning  of 
the  sale  of  a  "  tax  lien  "  shall  be  given  instead  of  notice  of 
the  sale  of  the  lease. 

Section  13  amends  Charter  Section  1027.  This  section 
now  provides  the  procedure  for  the  sale  of  leases  and  is 
amended  so  as  to  provide  for,  the  sale  of  '*  tax  liens."  Such 
procedure  is  substantially  unchanged.  It  provides  that  when 
taxes  or  assessments  are  unpaid  for  three  years  or  water  rents 
for  four  years,  the  Collector  of  Assessments  and  Arrears  shall 
advertise  "  tax  liens  "  for  sale  for  a  term  of  three  years  to  the 
person  who  bids  the  lowest  rate  of  interest,  not  exceeding 
twelve  per  cent.  The  Collector  shall  give  to  the  purchaser  of 
"  tax  liens  "  a  "  transfer  of  tax  lien,"  describing  the  property 
encumbered  by  the  lien ;  the  sum  to  be  paid :  the  amount 
advanced  and  the  rate  of  interest.  All  the  provisions  for 
advertising  such  sales  are  preserved  unchanged. 


H 


12 

Section  14.  Charter  Section  1028  is  repealed.  It  pro- 
vided for  the  advertisement  of  contiguous  lots  as  one  parcel, 
which  would  endanger  the  accuracy  of  the  procedure. 

SiccTiON  15.  Charter  Section  1029  is  renumbered  so  as  to 
he  1028,  and  is  unchanged  in  substance.  It  provides  that  the 
('omptroller  may  postpone  sales. 

Si-XTiON  16.  Charter  Section  1030  is  renumbered  so  as  to  be 
Section  1029.  It  provides  that  the  Collector  of  Assessments  and 
Arrears  shall  conduct  the  sales  and  is  amended  so  as  to  provide 
for  a  deposit  or  payment  on  account  by  the  purchaser  at  the  time 
of  sale  upon  terms  and  conditions  prescribed  by  the  Comptroller. 
*'  Transfers  of  Tax  liens  "  shall  be  delivered  to  the  purchaser, 
without  charge,  upon  payment  of  the  amount  due.  "  Transfers 
of  Tax  liens"  not  paid  for  within  thirty  days  may  be  canceled  and 
the  deposit  forfeited,  and  a  resale  made. 

Section  17.  Charter  Sections  1031  to  1049,  both  inclusive, 
are  repealed.  All  these  Sections  relate  solely  to  the  procedure  to 
be  followed  in  case  of  the  sale  of  leases  and  have  no  bearing  upon 
the  sale  of  '*tax  liens." 

Section  18  enacts  a  new  section  to  be  numbered  1030, 
defining  '*  transfer  of  tax  lien  "  and  describing  its  nature  and 
incidents.  "  Transfers  of  Tax  liens"  shall  be  executed  by  or  in 
behalf  of  the  Collector  of  Assessments  and  Arrears. 

Section  19  enacts  a  new  section  to  be  numbered  1031. 
It  provides  for  a  public  record  of  sales  of  "  Tax  liens  "  to  be 
kept  by  the  Collector  of  Assessments  and  Arrears.  A 
"  transfer  of  tax  lien  "  and  a  duly  acknowledged  assignment 
thereof  shall  be  deemed  conveyances  under  the  Real  Property 
Law  and  may  be  recorded  as  such.  Failure  to  record  does  not 
invalidate  the  lien.  The  various  records  may  be  read  in 
evidence. 

Section  20  enacts  a  new  section  to  be  numbered  1032. 
This  section  defines  the  rights  of  purchasers  of  tax  liens. 


13 

Section  21  enacts  a  new  section  to  be  numbered  1033, 
providing  for  the  discharge  of  the  tax  lien  when  paid. 

Section  22  enacts  a  new  section  to  be  numbered  1034, 
providing  for  the  exemption  from  taxation  of  tax  liens. 

Sections  23,  24,  25,  26,  27,  28  and  29  enact  new  sections 
to  be  numbered  1035,  1036,  1037,  1038,  1039,  1040  and  1041. 
providing  the  procedure  for  foreclosure  of  tax  liens. 

Section  30  adds  a  new  section  to  be  Section  1042.    It  pro- 
vides for  the  procedure  when  no  bid  for  a  "tax  lien"  is  received. 
In  this  case  the  Comptroller  and  Corporation  Counsel  shall  in- 
vestigate the  facts  and  reduce  the  amount  to  a  sum  for  which, 
in  their  judgment,  a  "tax  lien"  bearing  twelve  per  cent,  interest 
can  be  sold.    They  shall  file  a  certificate  in  writing  setting  forth 
the  amount  so  determined,  with  their  reasons.     Such  "tax  lien" 
shall  then  be  advertised  for  sale  to  the  person  who  shall  bid  the 
highest  amount  of  money  in  excess  of  the  amount  fixed  by  the 
Comptroller  and  Corporation  Counsel.    If  still  no  bid  is  received, 
the  Comptroller  and  Corporation  Counsel  shall  reconsider  their 
determination  and  proceed  as  before.     This  Section  is  added  in 
order  that  some  collection  may  be  made  by  the  city  and  title  cleared 
in  cases  where  the  arrears  equal  or  exceed  the  value  of  the  prop- 
erty. 

Sections  31  and  32  enact  new  sections  to  be  numbered 
1043  and  1044,  providing  for  the  reimbursement  of  the  owner 
of  a  "  transfer  of  tax  lien  "  in  case  the  tax  lien  shall  be  vacated 
or  canceled  in  whole  or  in  part. 

Section  33  enacts  a  new  section  to  be  numbered  1045. 
It  provides  that  owners  of  property  may  question  the  validity 
of  tax  liens  on  their  property ;  that  such  shall  be  referred  to 
the  Corporation  Counsel,  who  may  direct  the  surrender  of  a 
transfer  of  tax  lien  and  the  refunding  of  the  amount  paid 
therefor. 


^1 


M 


15 


I' 


SiXTiON  34  enacts  a  new  section  to  be  numbered  1046. 
It  provides  that  the  Corporation  Counsel  shall  be  notified  of 
any  procee^ling  adverse  to  the  validity  of  a  tax  lien  and  may 
intervene  in  such  proceeding. 

Section  35  enacts  a  new  section  to  be  numbered  1047. 
It  i)rovides  for  reimbursement  of  the  holder  of  a  transfer  of 
lien  which  is  invalid  in  whole  or  in  part,  and  directs  the  resale 
of  so  much  of  the  tax  lien  as  remains  valid. 

Section  36.  Charter  Section  1050  is  renumbered  so  as  to 
be  Section  1048.  It  provides  for  the  delivery  of  a  duplicate 
in  case  the  '*  transfer  of  tax  lien  "  is  lost,  and  is  otherwise 
without  change  of  substance,  except  that  the  provision  for 
registration  is  omitted  here  and  inserted  in  Section  1031. 

Section  37.  Charter  Section  1051  is  renumbered  so  as  to 
be  1049.  It  provides  that  bills  for  the  arrears  of  taxes  and 
assessments  shall  be  furnished  when  requested.  It  also  pro- 
vides that  the  certificate  of  the  Collector,  countersigned  by  the 
Comptroller,  shall  free  the  property  from  all  liens  except  the 
lien  of  "  transfers  of  tax  liens  "  duly  sold.  The  section  is 
unchanged  except  in  so  far  as  was  necessary  to  conform  the 
procedure  to  the  method  of  collection  by  the  sale  of  "  tax 
liens  "  instead  of  leases. 

Section  38.  Charter  Section  1052  is  renumbered  so  as  to 
be  1050.  It  provides  that  fees  for  searches  shall  be  included  in 
the  bills  mentioned  in  the  preceding  section  and  is  unchanged. 

Section  39  repeals  Charter  Section  1053.  It  provided  for 
a  complete  record  of  sales,  now  contained  in  Section  1031. 

Section  40.  Charter  Section  1054  is  renumbered  so  as  to 
be  Section  105 1.  It  provides  for  the  preservation  of  affidavits 
of  the  publication  of  notices  and  remains  unchanged. 

Section  41.  This  section  is  not  a  part  of  the  Charter  and  is 
designed  to  save  to  the  city  and  the  taxpayers  all  rights 
acquired  before  the  passage  of  the  Act. 


The  proposed  bill  is  as  follows: 

An  Act  to  amend  the  Greater  Xew  York  Charter  relative  to 
sales  of  lands  for  taxes,  assessments  and  water  rates. 

The  People  of  the  State  of  Ne^cV  York,  represented  in  Senate  and 
Assembly,  do  enact  as  follows: 

Section  i.  The  caption  of  Chapter  XVII.  of  the  Greater 
New  York  Charter,  as  re-enacted  by  chapter  four  hundred  and 
sixty-six  of  the  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  so  as  to  read  as  follows: 

CHAPTER  XVII. 
Taxes  and  Assessments. 
Title  I.     Department     of     Taxes     and     Assessments; 

powers  and  duties. 
Title  2.     Assessments  for    local    improvements    other 
than    those    confirmed    by    a    Court    of 
Record. 
Title  3.     Vacating  and  modifying  assessments  for  local 
improvements  other  than  those  confirmed 
by  a  Court  of  Record. 
Title  4.     Opening  Streets  and  Parks. 
Title  5.     Sales  of  tax  liens  on  lands   for  taxes,  assess- 
ments and  water  rates. 
§  2.     Section  nine  hundred  and  nine  of  the  Greater  New 
York   Charter,   as   re-enacted   by   chapter  four   hundred   and 
sixty-six  of  the  laws  of  nineteen  hundred  and  one,  is  hereby 
amended  so  as  to  read  as  follows : 

Assessment-Rolls    to    Remain    in    Custody    of    Board    of 

Aldermen. 
§  909.  The  tax  or  assessment  rolls,  when  finally  sub- 
mitted to  the  board  of  aldermen  on  the  first  Monday  of  July 
in  each  year,  shall  remain  in  its  custody,  but  the  president  of 
the  board  may,  by  written  permission,  permit  access  to  them, 
and  he  is  hereby,  in  the  name  of  the  board  of  aldermen  and  as 
its  act,  authorized  and  directed  to  cause  to  be  properly  esti- 
mated and  computed  the  taxes  annually  imposed,  and  cause 


i6 


the  same  to  be  properly  set  down  or  extended  in  the  several 
assessment  rolls  or  tax  books,  as  required  by  the  next  section. 
It  shall  also  be  the  duty  of  said  president  to  cause  the  items 
of  said  taxes  to  be  carefully  added,  and  to  set  down  the 
amount  of  the  same  therein ;  and  when  completed  to  deliver 
the  tax  books  relating  to  real  estate  to  the  comptroller,  in 
order  that  the  unpaid  water  rents,  and  the  expenses  of  meters, 
with  their  connections  and  setting,  water  rates  and  other  lawful 
charges  for  the  supply  of  water  measured  by  meters  of  any  [eachj 
preceding  year  may  be  entered  therein.  After  such  completion 
of  the  assessment  rolls  or  tax  books  it  shall  be  the  duty  of  the 
city  clerk  to  procure  the  proper  warrants  authorizing  and 
requiring  the  receiver  of  taxes  to  collect  the  several  sums 
therein  mentioned  according  to  law,  and  such  warrants  need 
be  signed  only  by  the  president  of  the  board  of  aldermen,  and 
countersigned  by  the  city  clerk,  and  immediately  thereafter 
the  president  of  the  board  of  aldermen  shall  deliver  the  said 
assessment  rolls,  with  the  warrants  aforesaid  annexed  thereto, 
to  the  receiver  of  taxes,  at  the  same  time  notifying  the  comp- 
troller of  the  amount  of  taxes  in  each  book,  in  order  that  he 
may  cause  the  proper  sum  to  be  charged  to  the  receiver  for 
collection. 

§  3.  Section  nine  hundred  and  twenty  of  said  law,  as 
amended  by  chapter  three  hundred  and  three  of  the  laws  of 
nineteen  hundred  and  seven,  is  hereby  amended  so  as  to  read 
as  follows : 


Undivided  Parts  of  Taxes:     Payment  of. 

§  920.  If  a  sum  of  money  in  gross  has  been  or  shall  be 
taxed  upon  any  lands  or  premises,  any  person  or  persons 
claiming  any  divided  or  undivided  part  thereof  may  pay  such 
part  of  the  sum  of  money  so  taxed,  also  of  the  interest  and 
charges  due  or  charged  thereon,  as  the  said  comptroller  may 
deem  to  be  just  and  equitable.  The  department  of  taxes  and 
assessments  shall  apportion  the  assessed   valuation  of  such 


17 


lands  or  premises  when  requested  by  the  comptroller  so  to  do, 
and  shall  certify  such  apportionment  to  him.  The  determina- 
tion of  the  said  comptroller  shall  be  based  upon  such  appor- 
tionment so  certified.  The  remainder  of  the  sum  of  money 
so  taxed,  together  with  the  interest  and  charges,  shall  be  a 
lien  upon  the  residue  of  the  land  and  premises  only,  and  the  ta.v 
lien  upon  such  [whichj  residue  may  be  sold  to  satisfy  [the 
residue  of]  such  tax,  interest  or  charges  thereon,  in  the  same 
manner  as  though  the  residue  of  said  tax  had  been  imposed  only 
upon  [the]  such  residue  of  said  lands  or  premises. 

§  4.     Section  nine  hundred  and  sixty-four  of  said  law  is 
hereby  amended  so  as  to  read  as  follows: 


tt 


I 


Re-assessment. 

§  964.  Any  lands  which  may  be  discharged  from  any  lien 
for  an  assessment  for  any  local  improvement  or  as  to  which  a 
sale  [for  non-paymentj  of  the  tax  lien  thereon  for  such  assess- 
ments authorized  to  be  made  by  section  ten  hundred  and  twentx- 
seven  of  this  act  has  been  vacated  or  set  aside  may  be  again 
assessed  in  the  manner  provided  by  law,  for  such  amount  as 
would  have  been  justly  chargeable  if  fraud  or  irregularity  had 
not  been  committed ;  and  the  amount  so  assessed  shall  be  a 
lien  on  said  lands  until  paid,  and  shall  be  collectible  in  the 
manner  provided  by  law  for  the  collection  of  assessments,  but 
all  proceedings  to  make  a  new  assessment  shall  be  at  the 
expense  of  the  city. 

§  5.  The  caption  of  Title  5  of  Chapter  XVII.  of  the 
Greater  New  York  Charter,  as  re-enacted  by  chapter  four 
hundred  and  sixty-six  of  the  Laws  of  nineteen  hundred  and  one. 
is  hereby  amended  so  as  to  read  as  follows : 

Title  5.     Sales  of  tax  liens  on  lands  for  taxes,  assess- 
ments and  water  rates. 

§  6.  Section  ten  hundred  and  seventeen  of  said  law  is  hereby 
amended  so  as  to  read  as  follows : 


i8 


When  Taxes  and  Water  Rents  to  be  Liens  on  Lands 

Assessed. 

§  1017.  All  taxes  and  all  assessments  for  local  improve- 
ments and  all  water  rents,  and  the  expenses  of  water  meters,  with 
their  connections  and  setting,  and  water  rates  and  other  lazi'ful 
charges  for  the  supply  of  water  measured  by  meters,  and  the  in- 
terest and  charges  thereon,  which  may,  in  The  City  of  New  York, 
as  by  this  act  constituted,  hereafter  be  laid  or  may  have  hereto- 
fore been  laid,  upon  any  real  estate  now  in  said  city,  shall 
continue  to  be,  until  paid,  a  lien  thereon,  and  shall  be  pre- 
ferred in  payment  to  all  other  charges.  No  assessments  for 
any  local  improvements  shall  be  deemed  to  be  fully  confirmed, 
so  as  to  be  due  and  be  a  lien  upon  the  property  included  in  the 
assessment,  until  ten  days  after  the  title  thereof,  with  the  date 
of  confirmation  shall  be  entered  with  the  date  of  such  entry, 
in  a  record  of  the  titles  of  assessments  confirmed,  to  be  kept 
in  the  office  of  the  collector  of  assessments  and  arrears. 

The  li'ords  "  water  rents"  zvhenez'er  they  are  used  in  this  title 
shall  include,  the  expenses  of  meters,  ivith  their  comvections  and 
setting,  water  rents,  liHiter  rates  and  all  lawful  charges  for  the 
supply  of  water  measured  by  meters. 

§  7.  Section  ten  hundred  and  twenty  of  the  Greater  New 
York  Charter  is  herebv  amended  so  as  to  read  as  follows : 


Rate. 

§  1020.  Interest  shall  hereafter  be  charged  and  collected 
at  the  rate  of  seven  per  centum  per  annum  on  all  arrears  of 
taxes  and  assessments  returned  to  the  collector  of  assessments 
and  arrears  from  the  time  they  become  due  [until  the  date  of 
payment,  or  in  case  a  sale  has  taken  place,  as  provided  in 
section  ten  hundred  and  twenty-seven,  until  the  date  of  the 
certificate  mentioned  in  said  section]  and  on  [thej  water  rents 
and  [charges  for  waterj   the  penalties  thereon  from  the  time 


I 


19 

the  taxes  become  due,  to  which  they  may  be  added  [as  re- 
quired by  section  ten  hundred  and  twenty-five,,  until  the  sanie 
date  respectively]  until  the  date  of  payment,  or  until  such  other 
date  zi'hen  the  amount  thereof  may  have  been  advanced  to  the 
city  by  the  purchaser  of  the  tax  lien  in  respect  thereof. 

§  8.  Section  ten  hundred  and  twenty-one  of  said  law  is  hereby 
amended  so  as  to  read  as  follows : 

Apportionment  of  Assessment. 
§  102 1.     If  a  sum  of  money  in  gross  has  been  or  shall  be 
assessed  for  local  improvements,  upon  any  lands  or  premises 
in  The  City  of  New  York,  any  person  or  persons  claiming  any 
divided  or  undivided  part  thereof  may  pay  such  part  of  the 
sums  of  money  so  assessed,  also  of  the  interest  and  charges 
due  or  charged  thereon,  as  the  comptroller  may  deem  to  be 
just  and  equitable.     The  board  of  assessors  shall  apportion  the 
assessed  valuation   of  such   lands  or  premises  zchen   requested 
by  the  comptroller  so  to  do,  and  shall  certify  such  apportion- 
ment to  him.     The  determination  of  the  said  comptroller  shall 
be  based  upon  such  apportionment  so  certified,    [and]    The  re- 
mainder of  the  sum  of  money  so  assessed,  together  with  the 
interest  and  charges,  shall  be  a  lien  upon  the  residue  of  the 
land  and  premises  only,  and  the  ta.v  lien   upon  such   [which] 
residue  may  be  sold  in  pursuance  of  the  provisions  of  this  act,  to 
satisfy  the  residue  of  such  assessment,  interest  or  charges  thereon, 
in  the  same  manner  as  though  the  residue  of  said  assessment  had 
been  imposed  upon  [the]  such  residue  of  said  land  or  premises. 

§  9.  Section  ten  hundred  and  twenty-three  of  said  law  is 
hereby  amended  so  as  to  read  as  follows: 

Receiver  of  Taxes  to  Return  Arrears  to  the  Collector. 

§  1023.  The  receiver  of  taxes  shall,  on  the  first  day  of 
June,  in  each  year,  make  a  return  to  the  collector  of  assess- 
ments and  arrears,  of  all  taxes  on  real  estate  and  of  water 
[rates  and]  rents,  which  have  been  added  thereto,  remaining 


20 

unpaid,  and  shall  notify  the  comptroller  of  the  aggregate 
amount  of  arrears  so  returned,  and  balance  on  his  books  the 
accounts  of  the  arrears  so  returned,  by  charging  the  amount 
thereof  to  the  said  collector,  and  shall  thereafter  receive  no 
payments  on  accounts  of  arrears  so  returned,  but  may  never- 
theless certify  to  the  collector  of  assessments  and  arrears  anv 
errors,  which  shall,  upon  such  certificate,  be  corrected  by  the 
said  collector  any  time  before  settlement. 

§  lo.     Section  ten  hundred  and  twenty-four  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Water  Rents  to  be  Pronided  for  in  Assessment-Rolls. 
§  1024.  There  shall  be  ruled  in  the  yearly  assessment-rolls 
of  each  section  or  ward  a  column  headed  "  water  rents  "  in 
which  inmiediately  after  the  confirmation  of  such  assessment- 
rolls,  the  collector  of  assessments  and  arrears  shall  cause  to 
be  entered  opposite  the  ward,  lot,  town  block  and  map  num- 
bers of  the  property  on  which  the  said  arrears  may  be  due, 
the  amounts  due  for  "  water  rents  "  and  the  expenses  of  meters, 
unth  their  connections  and  setting,  water  rates  and  other  lawful 
charges  for  the  supply  of  water  measured  by  meters,  as  trans- 
mitted to  him  by  the  commissioner  of  water  supply,  gas  and 
electricity,  in  accordance  with  the  law,  and  the  same  shall  be  col- 
lected at  the  same  time  and  in  the  same  manner  [withj  as  the 
taxes  to  which  they  shall  be  added. 

§  II.     Section  ten  hundred  and  twenty-five  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Arrears  Likewise  to  be  Provided  For. 
§  1025.  There  shall  be  ruled  in  the  yearly  assessment- 
rolls  of  the  taxes  in  each  section  or  ward,  a  column  headed 
"  arrears,"  in  which  the  collector  of  assessments  and  arrears 
shall  annually,  before  any  taxes  for  the  year  are  collected, 
cause  to  be  entered  the  word  "  arrears  "  [or  "  sold,"  according 
as  the  fact  may  be,]  opposite  to  the  ward,  lot,  town  block  and 
map  numbers  on  which  any  arrears  of  taxes,,  or  of  taxes  with 


21 

the  water  rent  added,  shall  be  due,  or  on  which  any  assessment 
shall  remain  unpaid  which  was  due  or  confirmed  one  month 
prior  to  the  first  of  June,  then  last  past,  [or  which  may  have 
been  sold  for  assessments,  taxes  or  water  rents,  and  yet  be 
redeemable.J 

§  12.     Section  ten  hundred  and  twenty-six  of  said  law  is 
hereby  amended  so  as  to  read  as  follows: 

Bills  for  Taxes  to  Show  Arrears. 
§  1026.  There  shall  be  ruled  a  column  for  "  arrears  "  in 
every  bill  rendered  for  taxes  for  lots  on  which  said  arrears  or 
assessments,  or  taxes  with  water  rents  added,  may  be  due, 
as  aforesaid,  [or  may  have  been  sold  and  yet  be  redeemable,] 
in  which  shall  be  written  opposite  the  entry  of  the  ward,  lot, 
town  block  and  map  number  of  said  lot,  ''  arrears  "  zcith  the 
date  when  such  arrears  or  any  part  thereof  first  accrued; 
[or  "  sold/'  according  as  the  fact  may  be ;]  and  at  the  bottom 
of  said  bill  shall  be  printed :  ''  IVhetiezTr  any  tax  or  assess- 
ment shall  remain  unpaid  for  three  years  or  any  waier  rent  shall 
remain  unpaid  for  four  years  the  tax  lien  on  the  property  zi'ill  be 
sold  to  satisfy  such  arrears  of  taxes,  assessments  or  zcater  rents, 
and  all  taxes,  assessments  and  zcater  rents  up  to  the  day  of  the 
date  of  the  first  advertisement  of  sale  as  stated  therein  "  ['"  the 
columns  for  arrears  indicate  lots  sold  for  arrears,  or  to  be  sold 
therefor;  arrears  to  be  paid  and  lots  redeemed  at  the  office  of  the 
collector  of  assessments  and  arrears."] 

§  13.  Section  ten  hundred  and  twenty-seven  of  said  law  is 
hereby  amended  so  as  to  read  as  follows : 

Sales  of  [Lands]  Tax  Liens  for  Taxes  and  Assessments: 

Proceedings. 

§  1027.  The  right  of  the  city  to  receive  taxes,  assessments 
and  water  rents  and  the  lien  thereof,  may  be  sold  by  the  city. 
and  after  such  sale,  shall  be  transferred,  in  the  manner  proz'idcd 
by  this  title.  The  right  and  lien  so  sold  shall  be  called  "tax  lien" 
and  the  instrument  by  z^'hich  it  is  assigned  shall  be  called  "trins- 


22 


23 


fcr  of  tax  lien."  Whenever  any  tax  on  lands  or  tenements,  or 
any  assessments  on  lands  or  tenements  for  local  improvements, 
shall  remain  unpaid  for  the  term  of  three  years  from  the  time  the 
same  shall  have  been  confirmed,  and  also  whenever  any  [rents 
for]  water  rents  in  said  city  shall  have  been  due  and  unpaid  for 
the  term  of  four  years  from  the  time  the  same  shall  have  been 
due,  it  shall  and  may  be  lawful,  for  the  collector  of  assessments 
and  arrears,  under  the  direction  of  the  comptroller,  to  adver- 
tise the  tax  liens  on  the  said  lands  and  tenements  or  any  of 
them  for  sale,  inelndiui:;  in  such  adrertiscment  the  tax  lien  for 
all  items  up  to  the  day  of  the  date  of  the  first  advertisement 
as  stated  therein  and  by  such  advertisement  the  owner  or 
owners  of  such  lands  and  tenements  respectively  shall  be 
required  to  pay  the  amount  of  such  tax.  assessment,  or 
water  rents,  ivith  the  said  penalties  thereon  so  remaining 
unpaid,  together  with  the  interest  thereon  at  the  rate  of 
seven  per  centum  per  annum  to  the  time  of  payment,  with  the 
charges  of  such  notice  and  advertisement,  to  the  said  collector, 
and  notice  shall  be  given  by  such  advertisement  that  if  default 
shall  be  made  in  such  payment  the  tax  lien  on  such  lands  and 
tenements  will  be  sold  at  public  auction  at  a  day  and  place  therein 
to  be  specified,  for  the  lowest  rate  of  interest,  not  exceeding 
tzvelve  per  centum  per  annum,  [term  of  yearsj  at  which  any 
person  or  persons  shall  offer  to  take  the  same  in  consideration 
of  advancing  the  said  tax,  assessment  [orj  and  water  rents 
and  penalties  as  the  case  may  be,  [and]  the  interest  thereon 
as  aforesaid  to  the  time  of  sale,  [and]  the  charges  of  the  above 
mentioned  notices  and  advertisement  and  all  other  costs  and 
charges  accrued  thereon ;  and  if,  notwithstanding  such  notice, 
the  owner  or  owners  shall  refuse  or  neglect  to  pay  such  tax, 
assessment,  [or]  water  rents  and  penalties  with  the  interests  as 
aforesaid,  and  the  charges  attending  such  notice  and  adver- 
tisement, then  it  shall  and  may  be  lawful  for  the  said  collector 
under  the  direction  of  the  said  comptroller,  to  cause  such  tax 
lien  on  such  lands  and  tenements  to  be  sold  at  public  auction 


[for  a  term  of  years],  for  the  purpose  and  in  the  manner 
expressed  in  the  said  advertisement,  and  such  sale  shall  be 
made  on  the  day  and  at  the  place  for  that  purpose  mentioned  in 
the  said  advertisement,  and  shall  be  continued  from  time  to 
time,  if  necessary,  until  all  the  tax  liens  on  the  lands  and 
tenements  so  advertised  shall  be  sold  [and  the  said  collector 
shall  give  to  the  purchaser  or  purchasers  of  any  such  lands 
and  tenements  a  certificate  of  sale,  in  writing,  describing  the 
lands  and  tenements  so  purchased,  the  term  of  years  for 
which  the  same  shall  have  been  sold,  the  sum  paid  therefor, 
and  the  time  when  the  purchaser  will  be  entitled  to  a  lease  of 
the  said  lands  and  tenements].  But  [no]  the  tax  lien  on 
houses  or  lots,  or  improved  or  unimproved  lands,  in  the  City 
of  New  York,  shall  not  be  hereafter  sold  [or  leased]  at  public 
auction  for  the  non-payment  of  any  tax,  assessment,  or  water 
rents  which  may  be  due  thereon,  unless  notice  of  such  sale 
shall  have  been  published  once  in  each  week  successively  for 
three  months  in  the  City  Record  and  the  corporation  news- 
papers, which  advertisement  shall  contain,  appended  to  said 
notice,  a  particular  and  detailed  statement  of  the  property  the 
tax  lien  on  H'hich  is  to  be  sold,  [for  taxes,  assessments  or 
water  rents,]  Or  the  said  detailed  statement  and  description, 
instead  of  being  published  in  the  City  Record  and  the  cor- 
poration newspapers,  shall,  at  the  option  of  the  said  comp- 
troller, be  printed  in  a  pamphlet,  in  which  case  copies  of  the 
pamphlet  shall  be  deposited  in  the  office  of  the  said  collector, 
and  shall  be  delivered  to  any  person  applying  therefor.  And 
the  notice  provided  for  in  this  section  to  be  given  of  the  sale 
of  tax  liens  on  houses  and  lots  and  improved  and  unimproved 
lands  shall  also  state  that  the  detailed  statement  of  the  taxes, 
assessments,  or  water  rents,  and  [the  ownership  of]  the 
property  [taxes]  taxed,  assessed,  [and]  or  on  which  the  water 
rents  are  unpaid,  is  published  in  the  City  Record  and  the  corpora- 
tion newspapers,  or  in  a  pamphlet,  as  the  case  may  be,  and  that 
copies  of  the  pamphlet  are  deposited  in  the  office  of  said  collector. 


i 


24 

and  will  be  delivered  to  any  person  applying  for  the  same.  No 
other  notice  or  demand  of  the  tax,  assessment,  or  water  rent 
shall  be  required  to  authorize  the  sale  of  tax  liens  on  any 
lands  and  tenements  as  hereinbefore  provided. 

§  14.  Section  ten  hundred  and  twenty-eight  of  said  law  is 
hereby  repealed. 

§  15.  Section  ten  hundred  and  twenty-nine  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  twenty- 
eight  and  is  amended  so  as  to  read  as  follows : 


Postponement  of  Sales. 

§  1028.  It  shall  be  lawful  for  the  comptroller  to  suspend 
or  postpone  any  sale  or  sales  of  tax  liens  on  lands  and  tene- 
ments or  any  portion  thereof  which  shall  have  been  adver- 
tised for  sale,  to  any  time  not  exceeding  fifteen  months  from 
the  day  specified  in  any  such  advertisement.  All  sales  which 
shall  be  so  postponed  or  suspended  [shallj  may  be  made  without 
further  advertisement,  other  than  a  general  notice  of  such 
postponement,  to  be  published  in  the  City  Record  and  the 
corporation  newspapers.. 

§  16.  Section  ten  hundred  and  thirty  of  said  law  is  hereby 
renumbered  so  as  to  be  section  ten  hundred  and  twenty-nine  and 
is  amended  so  as  to  read  as  follows : 

Sales  [for  Taxes  and  AssessmentsJ  of  Tax  Liens 
TO  BE  Conducted  by  the  Collector  of  Assessments  and 
Arrears  £:  Provision  for  Repayment  of  Purchase 
Money  When  the  Sale  is  Vacated]. 

§  1029.  The  collector  of  assessments  and  arrears  or  his 
assistant  shall  conduct  the  sales  hereinbefore  provided  to  be 
made,  and  no  auctioneer  other  than  said  collector  or  his 
assistant  shall  be  employed  to  make  such  sale,  and  no  auc- 


25 

tioneers'  fees  shall  be  charged  thereon.  The  comptroller  shall 
require  from  each  purchaser  of  a  tax  lien  at  the  time  of  such 
sale  a  deposit  on  account  of  the  amount  of  the  tax  lien 
purchased  by  him,  and  shall  prescribe  a  time  not  later 
than  thirty  days  from  the  date  of  sale,  when  the  balance  shall 
be  paid  to  the  callector  of  assessments  and  arrears,  at  his 
oiUce.  Transfers  of  tax  lien  [certificates  of  salej  shall  be  made 
and  delivered  to  the  purchaser  without  charge  upon  payment 
of  the  amounts  therein  shown  to  be  due.  [And  all  certificates 
of  sale  not  paid  for  within  thirty  days  following  the  date  of 
sale,  may  be  canceled  by  the  collector  of  assessments  and 
arrears  and  the  sales  relating  thereto  declared  void.  In  case 
any  sale  shall  be  vacated  or  canceled,  the  purchaser,  his  legal 
representative  or  assign,  shall  be  repaid  the  amount  paid  by 
him  at  such  sale,  with  interest  thereon  from  the  time  of  such 
payment.]  In  case  any  purchaser  shall  not  complete  his  pur- 
chase in  accordance  with  the  terms  prescribed  as  herein  provided, 
then  the  amount  deposited  by  him  at  the  time  of  the  sale  shaH 
be  forfeited  to  the  city,  and  the  entire  tax  lien  upon  the  lands 
affected  by  such  purchase  shall  be  sold  again.  Such  resale  shall 
be  held  at  such  time  as  the  comptroller  may  direct  and  shall  be 
advertised  in  the  City  Record  and  the  corporation  neivspapers, 
in  such  manner  and  for  such  time,  not  less  than  tivo  weeks,  as 
the  comptroller  may  direct.  All  deposits  forfeited  as  aforesaid 
shall  be  paid  into  the  General  Fund  of  the  City  of  Netv  York. 

§  17.  Sections  ten  hundred  and  thirty-one  to  ten  hundred  and 
forty-nine,  both  inclusive,  of  said  law  are  hereby  repealed. 

§  18.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  thirty,  and  to  read  as 

follows : 

Transfers  of  Tax  Liens. 

§  1030.  A  transfer  of  tax  lien  shall  operate  to  transfer  and 
assign  the  tax  lien  upon  the  lands  or  tenements  described  there- 
in for  the  taxes,  assessments  and  water  rents,  and  penalties,  the 
interest  thereon,  and  the  charges  of  the  notices  and  advertise- 


26 


ment  given  pursuant  to  section  ten  hundred  and  twenty-seven  of 
this  act,  and  all  other  costs  and  charges,  so  advertised  for  sale, 
free  of  all  taxes,  assessments  and  water  rents,  constituting  such 
tax  lien,  which  were  mentioned  in  such  advertisement  of  sale, 
but  subject  to  the  lien  for  and  right  of  the  city  to  collect  and  re- 
ceive all  taxes,  assessments  and  water  rents  which  accrued 
or  which  became  a  lien  on  and  after  the  day  of  the  date 
of  the  first  advertisement  of  such  sale  as  stated  therein.  A 
transfer  ot  tax  lien  shall  contain  a  transfer  and  assign- 
ment by  the  city  of  the  tax  lien  sold  to  the  purchaser,  the 
date  of  the  sale,  the  aggregate  amount  of  the  tax  lien  so  trans- 
ferred, and  the  items  of  taxes,  assessments,  water  rents,  penal- 
ties, and  interest  composing  the  tax  lien,  the  annual  rate  of  in- 
terest which  the  purchaser  has  bid  and  will  be  entitled  to  receive, 
the  date  when  the  amount  of  the  tax  lien  will  be  due,  and  a 
description  of  the  real  property  aflfected  by  the  tax  lien,  which 
description  shall  include  the  name  of  the  borough  in  which 
the  property  lies  and  shall  refer  for  certainty  to  the  designa- 
tion of  said  lot  on  the  tax  map,  by  its  lot  number  and  the 
number  of  the  block,  ward  or  section  in  which  it  is  contained, 
and  such  other  identifying  description  as  the  collector  of 
assessments  and  arrears  may  deem  proper  to  add.  Each  transfer 
of  tax  lien  shall  be  subscribed  by  or  in  behalf  of  the  collector  of 
assessments  and  arrears,  making  the  sale  or  a  successor  in 
office  of  such  collector,  and  shall  be  acknowledged  by  the 
officer  subscribing  the  same  in  the  manner  in  which  a  deed 
is  required  to  be  acknowledged  to  be  recorded  in  the  county 
in  which  the  real  property  affected  is  situated. 

§  19.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section  to  be  section  ten  hundred  and  thirty-one  and  to  read 
as  follows: 

Record  of  Transfers  of  Tax  Liens. 

§  103 1.  The  collector  of  assessments  and  arrears  shall 
keep  in  his  office  a  public  record  of  sales  of  tax  liens,  and  a 
copy  of  each  transfer  of  tax  lien  issued  by  him.     A  transfer 


27 

of  tax  lien  and  any  assignment  thereof,  duly  acknowledged,  shall 
be  deemed  conveyances  under  Article  VHI.  of  the  Real  Prop- 
erty Law,  and  may  be  recorded  in  the  office  of  the  recording 
officer  of  any  county  in  which  the  real  property  which  it  affects 
is  situated.  Transfers  of  tax  lien  and  all  assignments  thereof 
shall  be  recorded  by  recording  officers  in  the  same  manner  as 
mortgages  and  assignments  thereof,  but  without  payment  of 
tax  under  Article  XIV.  of  the  Tax  Law.  The  record  in  the 
office  of  the  collector  of  assessments  and  arrears  of  sales  of  tax 
liens,  of  a  transfer  of  tax  lien,  and  of  a  copy  of  a  transfer  tax 
lien ;  a  record  of  a  transfer  tax  lien  in  the  office  of  a  recording 
officer,  and  of  an  assignment  of  tax  lien,  duly  acknowledged,  in 
the  office  of  a  recording  officer,  shall  each  be  evidence  in  any  court 
in  the  state  without  further  proof.  A  transcript  of  any  record 
enumerated  in  this  section,  duly  certified,  shall  be  evidence  in  any 
court  in  the  state  with  like  effect  as  the  original  instrument  of 
record.  Neither  the  tax  lien  nor  the  rights  transferred  by  a 
transfer  tax  lien  shall  be  impaired  by  failure  to  record  the  trans- 
fer of  tax  lien  in  the  office  of  a  recording  officer.  Unless  a  con- 
trary intent  appears,  a  tax  lien  shall  be  presumed  to  be  merged 
with  the  title  of  the  owner  in  fee  simple  of  the  lands  or  tene- 
ments described  therein  whenever  it  shall  appear  from  recorded 
instruments  that  the  tax  lien  has  been  transferred  or  assigned  to 
the  owner  of  such  lands  or  tenements,  notwithstanding  other 
intervening  estates  or  liens. 

§  20.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-two,  and  to  read 
as  follows: 


Rights  of  Purchaser  of  Tax  Lien. 

§  1032.  The  aggregate  amount  of  each  tax  iien  trans- 
ferred pursuant  to  this  title,  shall  be  due  three  years  from  the 
date  of  the  sale.  Until  such  aggregate  amount  is  fully  paid 
and  discharged,  the  holder  of  the  transfer  of  tax  lien  shall  be 


I 


28 

entitled  to  receive  interest  on  such  aggregate  amount  from  the 
day  of  sale,  semi-annually  on  the  first  day  of  January  and  July,  at 
the  rate  which  the  purchaser  shall  have  bid.    At  the  option  of  the 
holder  of  any  transfer  of  tax  lien  the  aggregate  amount  thereof 
shall  become  due  and  payable  after  default  in  the  payment  of 
interest  for  thirty  days  or  after  default  for  six  months  after  the 
delivery  of  transfer  tax  lien  in  the  payment  of  any  taxes,  assess- 
ments  or  water  rents,  which  become  a  lien  on  and  after  the  day 
of  the  date  of  the  first  advertisement  of  the  sale  as  stated  therein, 
of  the  tax  lien  transferred  by  such  transfer  of  tax  lien.     Any  per- 
son having  a  legal  or  beneficial  interest  in  property  affected  by  a 
transfer  of  tax  lien  may  satisfy  the  same  before  maturity  upon 
giving  thirty  days'  notice  in  writing  to  the  holder  thereof,  of  the 
day  on    which    payment    will    be  made  and    upon    payment    of 
the     principal     with     interest     at    the     rate     bid     to     a     time 
three     months     after     the     day     so     fixed     for     payment.      If 
notice    of    intention    to    make    payment    be    given    as    herein 
provided,    and    such    payment    be    not    made,    then    the    whole 
amount  of  any  tax  lien  concerning  which  such  notice  shall  have 
been  given  shall  become  due  and  payable  at  the  option  of  the 
holder  thereof.     Or  any  such  person  may  pay  to  the  collector  of 
assessments  and  arrears  such  principal  with  interest  at  the  rate  bid 
up  to  a  day  six  months  after  such  payment.     In  case  such  pay- 
ment be  made  to  the  collector  of  assessments  and  arrears  he 
shall  receive  the  same  for  the  benefit  of  the  holder  of  the  tax 
lien  thus  discharged,  and  shall  give  notice  thereof  to  the  pur- 
chaser or  the  personal  representative  or  assignee  of  the  pur- 
chaser, by  mail  addressed  to  such  address  as  may  have  been  fur- 
nished to  the  collector  of  assessments  and  arrears.     Upon  re- 
ceiving surrender  of  such  transfer  of  tax  lien  the  collector  of 
assessments  and  arrears  shall  pay  to  the  person  entitled  thereto 
the  amount  thus  deposited. 

§  21.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-three,  and  to 
read  as  follows: 


29 

Discharge  of  Tax  Lien. 

§  1033.  A  tax  lien  sold  pursuant  to  the  provisions  of  this 
title  must  be  discharged  upon  the  record  thereof  by  the  col- 
lector of  assessments  and  arrears  when  payment  is  made  to 
him  of  the  principal  and  interest  as  provided  in  the  last  pre- 
ceding section,  and  also  when  the  transfer  of  tax  lien  is  sur- 
rendered to  him  for  cancellation  and  there  is  presented 
to  him  a  certificate  executed  by  the  purchaser,  or  the 
personal  representative  or  assignee  of  the  purchaser,  acknowl- 
edged  so  as  to  be  entitled  to  be  recorded  in  the  county  in 
which  the  real  property  affected  by  such  tax  lien  is  situated, 
certifying  that  the  tax  lien  has  been  paid  or  has  been  otherwise 
satisfied  and  discharged.  The  transfer  of  tax  lien  thus  surrend- 
ered and  such  certificate  of  discharge  must  be  filed  by  the  collector 
of  assessments  and  arrears  and  he  must  note  upon  the  margin 
of  the  record  of  such  sale,  upon  such  transfer  of  tax  lien  and 
upon  the  copy  of  the  transfer  of  tax  lien  kept  in  his  office  a 
minute  of  such  discharge  and  the  date  of  filing  thereof.  If 
the  transfer  of  tax  lien  shall  have  been  lost  or  destroyed  or  muti- 
lated, application  for  an  order  dispensing  with  the  production  of 
the  transfer  of  tax  lien  may  be  made  in  the  same  manner  as  is  pro- 
vided in  section  two  hundred  and  seventy-a  of  the  Real  Property 
Law,  the  provisions  of  which  so  far  as  the  same  may  be,  are 
hereby  made  applicable  to  discharge  of  tax  liens.  The  collector  of 
assessments  and  arrears  shall  upon  demand  issue  his  certificate 
showing  the  discharge  of  any  tax  lien  which  may  have  been  duly 
discharged  as  provided  in  this  section,  and  such  certificate  may 
be  filed  in  any  office  where  the  transfer  of  tax  lien  is  recorded, 
and  any  recording  officer  with  whom  ^uch  a  certificate  is  filed, 
shall  record  the  same,  and  upon  the  margin  of  the  record  of  such 
transfer  of  tax  lien  in  his  office  shall  note  a  statement  that  the 
same  has  been  discharged  with  a  reference  to  the  record  of  such 
certificate  in  his  office. 


ti 


30 

§  22.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-four,  and  to  read 
as  follows: 

Exemption  from  Taxation. 

§  1034.  Tax  liens  and  transfers  of  tax  liens  shall  be 
exempt  from  taxation  by  the  state  or  any  local  subdivisions 
thereof,  except  from  the  taxes  imposed  by  article  ten  of  the  tax 
law.  The  real  property  affected  by  any  tax  lien  shall  not  be 
exempt  from  taxation  by  reason  of  this  section. 

§  2-^^.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-five,  and  to  read 
as  follows: 

Foreclosure  of  Tax  Lien. 

§  1035.  If  the  amount  of  any  tax  lien  which  shall  have 
been  transferred  by  a  transfer  of  tax  lien  shall  not  be  paid 
when  under  its  terms  and  the  provisions  of  this  title  such 
amount  shall  be  due,  the  holder  of  such  tax  lien  may  maintain  an 
action  in  the  Supreme  Court  to  foreclose  such  tax  lien.  In  an 
action  to  foreclose  a  tax  lien  any  person  shall  be  a  proper  party 
of  whom  the  plaintiff  alleges  that  such  person  has  or  may  have 
or  that  the  plaintiff  has  reason  to  believe  that  such  person  has  or 
may  have,  an  interest  in  or  claim  upon  the  real  property  affected 
by  the  tax  lien.  Except  as  otherwise  provided  in  this  title  an 
action  to  foreclose  a  tax  lien  shall  be  regulated  by  the  provisions 
of  the  Code  of  Civil  Procedure  and  by  all  other  provisions  of 
law,  and  rules  of  practice  applicable  to  actions  to  foreclose  mort- 
gages on  real  property!  The  People  of  the  State  of  New  York 
may  be  made  party  to  an  action  to  foreclose  a  tax  lien  in  the  same 
manner  as  a  natural  person. 

§  24.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-six,  and  to  read 
as  follows: 


31 

Pleading  Transfer  of  Tax  Lien. 

§  1036.  Whenever  a  cause  of  action,  defense  or  counter- 
claim, is  for  the  foreclosure  of  a  tax  lien,  or  is  in  any  manner 
founded  upon  a  tax  lien  or  a  transfer  of  tax  lien,  if  in  any 
pleading  or  petition,  there  be  set  forth  a  copy  of  a  transfer  of 
tax  lien,  together  with  a  statement  of  the  time  and  place  of  the 
recording  thereof  in  the  office  of  the  collector  of  assessments  and 
arrears  or  in  any  other  public  office,  it  shall  not  be  necessary  to 
plead  or  prove  any  act,  proceeding,  notice  or  action  preceding 
the  issue  of  such  transfer  of  tax  sale,  nor  to  establish  the  validity 
of  the  tax  lien  transferred  by  such  transfer  of  tax  lien.  If  a 
party  or  person  in  interest  in  any  such  action  or  proceeding 
claims  that  a  tax  lien  is  irregular  or  invalid,  or  that  there  is  any 
defect  therein  or  that  a  transfer  of  tax  is  irregular,  invalid  or 
defective,  such  invalidity,  irregularity  or  defect  must  be  specifi- 
cally pleaded  or  set  forth,  and  must  be  established  affirmatively 
by  the  party  or  person  pleading  or  setting  forth  the  same. 

§  25.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-seven,  and  to 
read  as  follows : 

Judgment  L^pon  Tax  Lien. 

§  1037.  In  every  action  for  the  foreclosure  of  a  tax  lien, 
and  in  every  action  or  proceeding  in  which  a  cause  of  action, 
defense  or  counterclaim  is  in  any  manner  founded  upon  a  tax 
lien  or  a  transfer  of  tax  lien,  such  transfer  of  tax  lien  and  the 
tax  lien  which  it  transfers  shall  be  presumed  to  be  regular 
and  valid  and  effectual  to  transfer  to  the  purchaser  named 
therein  a  valid  and  enforcible  tax  lien.  Unless  in  such  an 
action  or  proceeding  such  tax  lien  or  transfer  of  tax  lien  be 
found  to  be  invalid  it  shall  be  lawful  in  any  interlocutory  or 
final  judgment,  or  any  final  order  entered  therein,  to  adjudge 
that  a  tax  lien  transferred  by  a  transfer  of  tax  lien  pleaded  or  set 
forth  as  provided  in  section  ten  hundred  and  thirty-six,  or  a  tax 
lien  established  or  proved  in  any  other  manner  to  the  satisfaction 


32 

of  the  court,  is  a  valid  lien  upon  all  or  part  of  the  real  property 
which  it  purports  to  affect,  and  that  the  transfer  of  tax  lien  trans- 
ferring the  same  is  effectual  to  transfer  such  tax  lien  to  the  pur- 
chaser named  therein. 

§  26.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-eight,  and  to 
read  as  follows: 

Judgment  of  Foreclosure  of  Tax  Lien, 

§  1038.  In  an  action  to  foreclose  a  tax  lien,  unless  the 
defendants  obtain  judgment,  the  plaintiff  shall  be  entitled  to 
a  judgment  establishing  the  validity  of  the  tax  lien  so  far  as  the 
same  shall  not  be  adjudged  invalid  and  of  the  transfer  of  tax  lien, 
and  directing  the  sale  of  the  real  property  affected  thereby,  or 
such  part  thereof  as  shall  l>e  sufficient  to  discharge  the  tax  lien, 
or  such  items  thereof  as  shall  not  be  adjudged  invalid,  and  all 
other  accrued  taxes,  assessments  and  water  rents  affecting 
the  real  property,  together  with  the  expenses  of  the  sale,  and  the 
costs  of  the  action. 

§  2^.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  thirty-nine,  and  to 
read  as  follows: 

Effect  of  Judgment  Foreclosing  Tax  Lien. 

§  1039.  Every  final  judgment  in  an  action  to  foreclose  a  tax 
lien  shall  be  binding  upon,  and  every  conveyance  upon  a  sale 
pursuant  thereto,  shall  transfer  to  and  vest  in  the  purchaser  all 
the  right,  title,  interest  and  estate  in  and  claim  upon  the  real 
property  affected  by  such  judgment,  of,  the  plaintiff,  each  de- 
fendant, whether  individual  or  trustee,  upon  whom  the  summons 
is  served,  each  person  claiming  from,  through  or  under  such  a 
defendant  by  title  accruing  after  the  filing  of  notice  of  pendency 
of  the  action  or  after  the  entry  of  judgment  and  filing  of  the 
judgment  roll  in  the  proper  county  clerk's  office,  and  each  person 
not  in  being  when  the  judgment  is  rendered,  who  afterwards 


33 

may  become  entitled  to  a  beneficial  interest  attaching  to,  or  an 
estate  or  interest  in  such  real  property  or  any  portion  thereof, 
provided  that  the  person  first  entitled  to  such  beneficial  interest, 
estate  or  interest  is  a  party  to  such  action  or  bound  by  such  judg- 
ment. So  much  of  section  four  hundred  and  forty-five  of  the 
Code  of  Civil  Procedure  as  requires  the  court  to  allow  a  defend- 
ant to  defend  an  action  after  final  judgment  shall  not  apply  to 
an  action  to  foreclose  a  tax  lien.  Delivery  of  the  possession  of 
real  property  affected  by  a  judgment  to  foreclose  a  tax  lien  may 
be  compelled  in  the  manner  prescribed  in  section  sixteen  hundred 
and  seventy-five  of  the  Code  of  Civil  Procedure. 

§  28.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty,  and  to  read 
follows :  ^ 

Surplus. 

§  1040.  Any  surplus  of  the  proceeds  of  the  sale,  after  pay- 
ing the  expenses  of  the  sale,  and  all  taxes,  assessments  and  water 
rents  which  accrued  or  became  a  lien  on  and  after  the  da\ 
of  the  date  of  the  first  advertisement  of  the  sale  as  stated  therein, 
under  which  the  foreclosed  transfer  ot  tax  lien  was  issued,  and 
satisfying  the  amount  of  the  tax  lien  and  interest  and  the  costs  of 
the  action,  must  be  paid  into  court,  for  the  use  of  the  person  or 
persons  entitled  thereto,  [f  any  part  of  the  surplus  remains  in 
court  for  the  period  of  three  months,  and  no  application  has  been 
made  therefor,  the  court  nmst.  and.  if  an  application  therefor  is 
pending,  the  court  may  direct  such  surplus  to  be  invested  at  inter- 
est, for  the  benefit  of  the  person  or  persons  entitled  thereto,  to  be 
paid  upon  the  direction  of  the  court. 

§  29.  The  said  law  is  hereby  amended  by  adding  thereto  :i 
new  section,  to  be  section  ten  hundred  and  forty-one,  and  to  read 
as  follows: 

Foreclosed  Tax  Lien  Not  Arrears. 

§  1041.  Any  party  to  an  acti<in  to  foreclose  a  tax  lien  or 
any  pun^haser  or  any  party  in  interest  may  give  notice  of  such 


I 


34 

foreclosure  to  the  collector  of  assessments  and  arrears,  and  after 
such  notice  the  items  which  constituted  the  tax  lien  thus  fore- 
closed shall  not  be  entered  by  the  collector  of  assessments  and 
arrears  in  any  yearly  assessment  roll,  so  long  as  the  judgment 
of  foreclosure  of  such  lien  remains  in  force. 

§  30.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-two,  and  to  read 
as  follows: 


Procedure  When  No  Bid  for  a  Tax  Lien  is  Received. 

§  1042.  If  no  bid  be  received  for  a  tax  lien  on  any  parcel 
of  property  at  a  duly  advertised  sale  and  it  shall  appear  to  the 
comptroller  that  the  taxes,  assessments,  water  rents,  penalties 
and  accrued  interest  amount  to  so  large  a  proportion  of  the 
value  of  the  property  that  the  security  is  insufficient  to  attract 
bidders,  then  and  in  that  event  the  comptroller  and  the  cor- 
poration counsel  shall  investigate  the  facts  and  may  fix  a  lesser 
amount  for  which  in  their  judgment  a  tax  lien  bearing  twelve 
per  centum  interest  can  be  sold,  A  certificate  in  writing, 
signed  by  them,  shall  be  filed  with  the  collector  of  assessment 
and  arrears,  setting  forth  the  amount  so  determined  by  them, 
together  with  a  brief  statement  of  the  reasons  for  such  reduc- 
tion, which  certificate  shall  include  the  total  amount  of  the 
taxes,  assessments,  water  rents,  penalties  and  accrued  interest, 
the  assessed  value  of  such  parcel  of  real  estate,  and  the  value 
of  the  land  as  the  same  appears  on  the  last  preceding  assess- 
ment roll.  Thereafter  such  reduced  amount  shall  constitute  the 
tax  lien  upon  said  real  property  for  the  items  therein  enumerated, 
which  reduced  an^ount  shall  bear  interest  at  the  rate  of  seven 
])er  cent,  per  annum  from  the  date  of  such  certificate  until  fully 
paid,  or  until  the  tax  lien  thus  fixed,  together  with  the  lien  for 
any  other  taxes,  assessments,  water  rents,  and  penalties  and  in- 
terest becoming  liens  thereafter  shall  be  sold.  The  collector  of 
assessments  and  arrears  shall  forthwith  advertise  the  tax  lien 
for  such  reduced  amount  for  sale  to  the  highest  bidder  in  the 


35 

manner  provided  for  the  advertisement  for  the  sale  of  ordinary 
tax  liens.  Such  tax  lien  shall  bear  interest  at  twelve  per  centum 
and  shall  be  sold  to  the  person  bidding  the  highest  amount  of 
money  in  excess  of  the  reduced  amount  so  fixed  by  the  comp- 
trollei  and  corporation  counsel,  provided  that  if  the  bidding 
reaches  the  original  amount  of  the  tax  lien  on  the  real  property 
affected,  the  sale  shall  proceed  in  the  manner  provided  in  sec- 
tion ten  hundred  and  twenty-nine.  If  no  bid  shall  be  received 
at  such  sale,  the  comptroller  and  corporation  counsel  shall  re- 
consider their  determination  and  may  file  a  new  certificate  in 
the  manner  hereinbefore  provided,  and  the  collector  of  assess- 
ments and  arrears  shall  proceed  again  as  hereinbefore  directed. 
Such  procedure  shall  be  repeated  until  a  tax  lien  for  such  taxes. 
assessments,  water  rents  and  accrued  interest  shall  be  sold. 

§  31.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-three,  and  to  read 
as  follows: 


Reimbursement  for  Defective  Tax  Liens  or  Transfers  of 

Tax    Liens. 

§  1043.  I^  ^  transfer  of  tax  lien  be  vacated  or  be  set  aside 
or  canceled,  or  if  it  be  adjudged  in  any  action  that  a  transfer  of 
tax  lien  is  invalid  or  defective,  or  not  sufficient  to  transfer  a 
tax  lien  to  the  purchaser  thereof,  or  if  in  any  action  to  fore- 
close a  tax  lien,  it  be  adjudged  that  the  entire  tax  lien  is  void 
and  not  a  valid  lien  on  the  premises  which  it  purports  to  affect, 
and  that  the  complaint  be  dismissed,  the  purchaser  may  surrender 
such  transfer  of  tax  lien  to  the  collector  of  assessments  and 
arrears  and  thereupon  shall  be  repaid  by  the  city  the  amount 
paid  for  such  transfer  of  tax  lien,  with  interest  from  the  time 
of  such  payment  at  the  rate  set  forth  in  the  transfer  of  tax 
lien,  and  the  city  shall  pay  the  taxed  costs  and  disbursements 
of  any  action  or  proceeding  in  which  such  adjudication  is 
made. 


§  32.  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  forty-four,  and  to 
read  as  follows: 

Reimbursement  When  Part  of  Tax  Lien  Is  Defective. 

§  1044.  If,  in  any  action  to  foreclose  a  tax  lien,  it  shall  be 
adjudged  that  some,  but  not  all  of  the  items  constituting  such 
tax  lien  are  void  and  not  a  valid  lien  on  the  premises  covered 
by  such  tax  lien,  or  if  in  any  action  or  proceeding  it  be  ad- 
judged that  a  transfer  of  tax  lien  is  invalid  or  defective,  as  to 
some  though  not  as  to  all  of  the  items  transferred,  the  holder 
of  the  transfer  of  tax  lien,  by  instrument  in  writing  duly  acknowl- 
edged, shall  retransfer  to  the  city  the  items  thus  affected, 
and  shall  be  repaid  by  the  city  such  portion  of  the  amount  paid 
for  such  transfer  of  tax  lien  as  may  be  applicable  to  the  items 
thus  affected,  with  interest  from  the  time  of  such  payment  at 
the  rate  set  forth  in  the  transfer  of  tax  lien,  and  the  city  shall 
pay  the  taxed  costs  and  disbursements  of  any  action  or  pro- 
ceeding, other  than  an  action  to  foreclose  the  tax  lien,  in 
which  such  adjudication  is  made. 

§  33-  The  said  law  is  hereby  amended  by  adding  thereto 
a  new  section,  to  be  section  ten  hundred  and  forty-five,  and  to  read 
as  follows: 

Owners  May  Question  Transfers  of  Tax  Liens. 

§  1045.  Any  person  interested  in  or  holding  a  lien  upon  any 
real  property  affected  by  any  unpaid  tax  lien  or  transfer  of  tax 
lien,  may  file  a  written  notice  with  the  collector  of  assessments 
and  arrears  claiming  that  a  transfer  of  tax  lien  is  invalid  or 
defective  or  that  a  tax  lien  which  has  been  transferred  pur- 
suant to  this  title  or  which  is  advertised  to  be  transferred 
is  invalid,  defective,  void  or  ineffectual,  or  should  be  vacated 
or  set  aside.  The  collector  of  assessments  and  arrears  shall 
transmit  all  such  notices  to  the  corporation  counsel,  who  shall 
examine  into  the  facts  and  proceedings  resulting  in  the  tax 


37 

lien  or  transfer  of  tax  lien  mentioned  in  such  notice ;  before  a 
determination  is  had  the  corporation  counsel  shall  serve  a  copy 
of  such  notice  upon  the  holder  of  the  transfer  of  tax  lien  which 
is  thus  questioned  or  which  transfers  the  items  thus  questioned 
and  shall  give  such  holder  an  opportunity  to  be  heard.  The 
corporation  counsel  shall  certify  in  writing  his  opinion  upon 
the  matters  and  questions  raised  by  such  notice,  and  if  he  con- 
eludes  that  a  defense  in  an  action  to  foreclose  the  tax  lien 
would  succeed  in  whole  or  in  part  he  shall  so  certify,  and  shall 
recommend  what  action  shall  be  taken  by  the  city  concerning 
the  same.  If  the  corporation  counsel  concludes  that  such  de- 
fense would  succeed  in  whole  or  in  part  and  recommends  re- 
payment by  the  city  of  the  amount  paid  for  a  transfer  of  tax 
lien  which  would  be  applicable  to  any  item,  he  shall  state  the 
reasons  for  such  recommendation,  and  if  it  be  approved  by 
the  mayor  and  comptroller  the  city  shall  require  the  surrender 
of  the  transfer  of  tax  lien  or  the  retransfer  to  it  of  the  item  or 
items  of  tax  lien  which  are  found  to  be  void  or  defective,  and 
shall  make  repayment  therefor  in  the  same  manner  as  if  such 
transfer  of  tax  lien,  tax  lien  or  items  had  been  adjudicated  in 
the  manner  provided  in  sections  ten  hundred  and  forty-three 
and  ten  hundred  and  forty-four.  Neither  the  provisions  of  this 
section  nor  any  act  or  proceeding  thereunder  shall  impair  or  in 
any  other  manner  affect  the  rights  or  remedies  of  any  person  in- 
terested in.  or  holding  any  lien  n])on,  real  property  to  question  the 
validity  of  any  tax,  assessment,  water  rents  or  tax  lien,  or  any  part 
or  item  of  any  tax  lien. 

§  34.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-six,  and  to  read 
as  follows: 


Corporation  Counsel  to  Protect  Interest  of  City. 

§  1046.  No  claim  shall  be  made  against  the  city  under 
sections  ten  hundi-cd  and  forty-three,  ten  hundred  and  fortv- 
four    or    ten    hundred    and    forty-five    by    the    holder    at    any 


38 

tax  lien,  unless  action  to  foreclose  the  tax  lien  or  trans- 
fer of  tax  lien  upon  which  such  claim  is  .  founded  he 
commenced  within  five  years  from  the  time  of  the  sale 
resulting  in  such  transfer  of  tax  lien.  Nor  shall  any  claim  be 
made  against  the  city  under  sections  ten  hundred  and  forty-three 
or  ten  hundred  and  forty-four,  unless  within  ten  days  after  the 
commencement  of  any  action  or  proceeding  to  vacate,  set  aside  or 
cancel  a  transfer  of  tax  lien,  or  a  tax  lien  or  an  item  mentioned  in 
a  transfer  of  tax  lien,  or  unless  within  ten  days  after  the  service 
of  any  pleading  or  other  paper  in  an  action  or  proceeding  in  which 
any  transfer  of  tax  lien,  or  item  mentioned  in  a  transfer  of  tax 
lien,  is  brought  into  question,  sought  to  be  set  aside,  vacated, 
or  canceled,  or  which  sets  forth  or  pleads  any  defense  to  an 
action  to  foreclose  a  tax  lien,  a  notice  in  writing  be  served 
upon  the  corporation  counsel  setting  forth  the  question  or 
objection  raised  to  the  best  knowledge  of  the  holder  of  the 
transfer  of  tax  lien,  or  his  attorney  at  law,  and  demanding 
that  the  city  take  up  the  prosecution  or  defense  of  the  action 
or  proceeding.  All  proceedings  in  such  action  or  proceeding 
shall  be  stayed  for  thirty  days  or  such  shorter  time  as  the 
corporation  counsel  shall  stipulate  in  writing.  It  shall  be  the 
duty  of  the  corporation  counsel  to  examine  the  questions 
raised,  and.  in  order  to  protect  the  interests  of  the  city,  he 
shall  have  the  right  to  be  substituted  for  the  attorney  of 
record  of  the  holder  of  the  transfer  tax  lien,  or  to  appear  as 
attorney  of  record  for  the  holder  of  any  such  transfer  of  tax 
lien,  to  conduct  or  defend  any  such  action  or  proceeding  in  the 
name  of  the  holder  of  the  transfer  of  tax  lien,  and  to  bring  any 
other  action  or  proceeding  for,  on  behalf  of  and  in  the  name  of 
the  holder  of  such  transfer  of  tax  lien  as  he  may  deem 
advisable,  to  take  appeals,  and  to  argue  appeals  taken  by  the 
adverse  party,  as  he  may  deem  advisable.  It  shall  be  the  duty 
of  the  corporation  counsel  to  protect  the  interest  of  the  city 
in  all  matters,  actions  and  proceedings  relating  to  tax  liens 
and  transfers  of  tax  liens ;  to  intervene  on  behalf  of  the  city 
or  of  the  holder  of  a  transfer  of  tax  lien  in,  or  to  make  the  city 


39 

a  party  to  any  action  in  which  he  believes  it  to  be  to  the 
interest  of  the  city  so  to  do,  by  reason  of  any  matter  arising 
under  or  relating  to  any  tax  lien  or  transfer  of  tax  lien,  or 
advertisement  of  sale  of  tax  liens.  In  any  action  or  proceeding 
in  which  the  corporation  counsel  pursuant  to  this  section  shall 
be  substituted,  or  shall  appear,  it  shall  be  without  expense  to 
the  holder  of  the  transfer  of  tax  lien,  and  all  costs  recovered  on 
behalf  of  such  holder  of- a  transfer  of  tax  lien  in  any  action  or 
proceeding  conducted  or  defended  by  the  corporation  counsel 
shall  belong  to  the  city  and  shall  be  collected,  applied  and  dis- 
posed of  in  the  same  manner  as  are  other  costs  recovered  by  the 
city, 

§  35.  The  said  law  is  hereby  amended  by  adding  thereto  a 
new  section,  to  be  section  ten  hundred  and  forty-seven,  and  to  read 
as  follows : 

Defective  or  Invalid  Transfer  of  Tax  Lien  ;  Proceeding 

Anew. 

§  1047.  If  a  transfer  of  tax  lien  be  vacated  or  be  set 
aside  or  canceled  or  it  be  adjudged  that  a  transfer  of  tax 
lien  is  invalid  or  defective,  or  insufficient  to  transfer  a  tax 
lien  to  the  purchaser  thereof,  or  if  in  any  action  to  foreclose  a 
tax  lien,  it  be  adjudged  that  a  tax  lien  is  not  a  valid  lien  on  the 
premises  which  it  purports  to  affect,  because  of  some  irregu- 
larity in  the  proceedings  had,  and  if,  in  pursuance  of  any  such 
adjudication  the  purchaser  of  said  transfer  of  tax  lien  shall 
have  surrendered  such  transfer  of  tax  lien  to  the  collector  of 
assessments  and  arrears  and  shall  have  been  repaid  by  the 
city,  the  amount  paid  for  such  transfer  of  tax  lien,  with  in- 
terest and  costs  and  disbursements  of  the  said  action  or  pro- 
ceeding in  which  such  adjudication  was  made,  then  and  in 
that  event,  the  tax  lien  which  was  purported  to  be  transferred 
and  assigned  in  such  transfer  of  tax  lien  shall  remain  as  a 
valid  lien  upon  the  premises  which  it  affects,  except  to  such 
extent  as  it  may  have  been  adjudged    irregular  or  invalid,  and 


I 


r 

i 


40 

the  collector  of  assessments  and  arrears  shall  proceed  to  sell 
anew,  as  provided  in  section  ten  hundred  and  twenty-seven  of 
this  act,  -so  much  of  the  said  tax  lien  as  is  not  invalid  as  if  no 
prior  sale  purporting  to  transfer  the  said  tax  lien  liad  taken  place. 

§  36.  Section  ten  hundred  and  fifty  of  said  law  is  herehy 
renumbered  so  as  to  be  section  ten  hundred  and  forty-eight, 
and  amended  so  as  to  read  as  follows : 

Lost    [CertificateJ    Transfer   of    Tax   Lien      Delivery    of 
[Lease]  Duplicate  in  Case  OFo 

§  1048.  Whenever  any  [certificate]  transfer  of  tax  lien 
given  by  the  collector  of  assessments  and  arrears,  as  in  this 
title  provided,  [of  land  sold]  shall  be  lost,  the  [said]  comp- 
troller may  receive  evidence  of  such  loss,  and  on  satisfactory 
proof  of  the  fact  may  direct  the  collector  of  assessments  and 
arrears  to  execute  and  deliver  a  [lease]  dnpUcate  to  such  per- 
son or  persons  who  shall  appear  entitled  thereto  [of  the  lands 
and  tenements  described  in  the  certificate],  and  may  also,  in 
his  discretion,  require  a  bond  of  indemnity  to  The  City  of 
New  York.  [Each  certificate  shall  be  registered  in  the  record 
of  sales  to  be  kept  in  the  bureau  of  said  collector  of  assess- 
ments and  arrears,  and  no"  transfer  of  such  certificate  shall  be 
valid  until  registered  in  said  book.] 

§  37.  Section  ten  hundred  and  fifty-one  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  forty- 
nine,  and  amended  so  as  to  read  as  follows: 

Bills  of  Arrears  of  Taxes  and  Assessments  to  be  Fur- 
nished When  Requested. 

§  1049.  A'lie  collector  of  assessments  and  arrears,  upon 
the  requisition  of  any  person,  shall  furnish  a  bill  of  all  arrears 
of  taxes,  and  of  taxes  with  the  "  water  rents  "  added  on  any 
lot  or  lots  due  prior  to  the  first  of  June,  then  last  past,  and  of 
assessments  which  are  due  and  payable  [including  the  amount 


41 

necessary  to  redeem  it  or  them,  if  it  or  they  have  been  sold 
for  any  arrears  of  assessments,  taxes  or  water  rents  and  be 
yet  redeemable];  and  upon  the  payment  of  the  said  bill  (which 
shall  be  called  a  "bill  of  arrears  and  assessments,  taxes  and 
water  rents,")  [and  for  redemption]  his  receipt  thereon, 
countersigned  by  the  comptroller,  shall  be  conclusive  evidence 
of  such  payment.  The  comptroller  shall  cause  to  be  kept  a 
duplicate  account  of  amounts  so  collected,  and  the  certificate 
of  the  collector  of  assessments  and  arrears,  countersigned  by 
the  comptroller,  that  there  are  no  [such]  tax  liens  on  said  lot  or 
lots,  shall  forever  free  the  said  lot  or  lots  from  all  liens  of  taxes,  or 
for  taxes  with  water  rates  added,  or  for  rents  of  water  added 
to  the  taxes  prior  to  the  first  of  June  then  last  past,  and  for 
all  assessments  due  and  payable  prior  to  the  date  of  the  said 
receipt  or  certificate,  hut  not  from  the  lien  of  any  tax  lien 
duly  sold  [and  from  all  liens  in  consequence  of  sales  for 
assessments,  taxes,  or  water  rents,  or  for  all  of  them,  when 
the  time  allowed  by  law  for  redemption  had  not  expired  at  the 
date  or  time  of  said  payment  or  certificate]. 

§  38.  Section  ten  hundred  and  fifty-two  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  fifty. 

§  39.  Section  ten  hundred  and  fifty-three  of  said  law  is 
hereby  repealed. 

§  40.  Section  ten  hundred  and  fifty-four  of  said  law  is 
hereby  renumbered  so  as  to  be  section  ten  hundred  and  fifty- 
one. 

§  41.  This  act  shall  not  affect  or  impair  any  act  done  or 
right  accruing,  accrued  or  acquired,  nor  any  penalty  or  for- 
feiture incurred  prior  to  the  time  when  this  act  takes  effect, 
by  virtue  of  any  section  of  the  Greater  New  York  Charter 
repealed,  amended  or  modified  by  this  act;  but  such  right, 
penalty,  or  forfeiture,  may  be  asserted,  enforced,  prosecuted 
or  inflicted  as  fully  and  to  the  same  extent  as  if  this  act  had 
not   been   passed   or   said   sections   had   not   been   amended. 


■  WKi  pv 


m 


repealed  or  modified ;  no  tax  lease  heretofore  issued  nor  any 
tax  sale  heretofore  made  shall  be  affected  by  this  act,  but  the 
rights  of  all  persons,  with  respect  thereto,  shall  be  the  same 
as  if  this  act  had  not  been  passed,  and  all  actions,  suits,  pro- 
ceedings  or  prosecutions   under   the   sections   of  Title   5  of 
Chapter   XVII.   of   the   Greater   New   York   Charter   hereby 
amended,  repealed   or  modified  and   pending  when   this  act 
takes  effect  may  be  prosecuted  and  defended  to  final  effect  in 
the  same  manner  as  they  might  prior  to  the  time  when  this 
act  takes  effect. 

§  42.     This  act  shall  take  effect  January  first,  1909. 

Tax  Liens  Made  Legal  Investments  for  Savings  Banks. 

In  order  that  there  may  be  as  wide  a  market  as  possible 
for  the  sale  of  tax  liens,  it  is  proposed  that  they  shall  be  a  legal 
investment  for  savings  banks,  the  following  bill  is,  therefore, 
proposed  to  accomplish  this  object : 

An  Act  to  amend  the  Banking  Law  by  providing  that  tax 
liens  of  The  City  of  New  York  shall  be  lawful  invest- 
ments for  savings  banks. 

The  People  of  the  State  of  New  York,  represented  in  Senate 
and  Assembly,  do  enact  as  follows: 

§  I.  Subdivision  four  of  section  one  hundred  sixteen 
of  chapter  six  hundred  eighty-nine  of  the  Laws  of  eighteen 
hundred  and  ninety-two,  being  chapter  thirty-seven  of  the 
General  Laws,  as  amended  by  chapter  three  hundred  twenty- 
eight  of  the  Laws  of  .nineteen  hundred  and  three,  is  hereby 
amended  so  as  to  read  as  follows : 

4.     In  transfers  of  tax  liens  of  the  City  of  Nezv  York  ivhcrc 
the  amount  of  tax  liens  docs  not  exceed  half  the  assessed  value  of     ' 
the  real  property  encumbered  thereby,  in  the  stocks  or  bonds 
of  any  city,  county,  town  or  village,  school  district  bonds  and 


43 

union  free  school  district  bonds  issued  for  school  purposes, 
or  in  the  interest  bearing  obligations  of  any  city,  county,  town 
or  village  of  this  state,  issued  pursuant  to  the  authority  of 
any  law  of  the  state,  for  the  payment  of  which  the  faith  and 
credit  of  the  municipality  issuing  them  are  pledged. 

§  2.     This  act  shall  take  effect  the  first  day  of  January,  nine- 
teen hundred  and  nine. 


ADVISORY  COMMISSION 


ON 


Taxation  and  Finance. 


FINAL    REPORT 


OCTOBER,    1908. 


New  York: 
MARTIN    B.    BROWN    COMPANY,    PRINTERS    AND    STATIONERS. 

Nos.  49  TO  57  Park  Place. 

I  9  o  8  . 


_L-     .-^ 


Chairman^ 
Edcar  J.  Levey. 


Committee  on  Taxation  and  Rct'cjiuc. 


Lawson  Purdy, 
Edwin  R,  A.  Seligman, 
Francis  Lynde  Stetson, 


Joseph  Haac, 
Edwaro  E.  Heydecker. 
David  E.  Atsten. 


Committee  on  The  City  Debt  and  Special  Assessments. 

Edward  M.  Shepard,  Herman  A.  Metz. 

John  L.  Cadwalader  Francis  Key  Pendleton. 

Frank  J.  Goodnow. 


Committee  on  -Iccnnntimi  and  Statistics. 

Frederick  A.  Cleveland,  Julian  D.  Fairchild, 

Herman  Ridder,  John  Crane. 

John   C.  Hertle. 


^g/j^tj^ 


ri^^asafie^^fii 


Nkvv  York.  October  29,  1908. 

Hon.  George  B.  McClellan, 

Mayor, 
The  City  of  New  York. 

Sir — In  February,  1905,  you  requested  the  following  named 
gentlemen  to  serve  as  an  Advisory  Commission  on  Taxation  and 
Finance : 


Edgar  J.  Levey, 
John  L.  Cadwalader, 
Morris  K.  Jesup, 
Edwin  R.  A.  Seligman, 
Edward  M.  Shepard, 
Charles  T.  Barney, 
Herman  Ridder, 
Francis  Lynde  Stetson, 

John  C.  Hertle. 


Julian  D.  Fairchild, 
Lawson  Purdy, 
Frederick  A.  Clevelan<l, 
John  Crane, 
John  J.  Delany, 
Frank  A.  O'Donnel, 
Alonzo  Bell, 
Frank  J.  Goodnow, 


Upon  the  death  of  ^Ir.  O'Donnel  you  appointed  Mr.  Joseph 
Haag  to  fill  the  vacancy,  and  in  like  manner  to  fill  the  vacancy 
caused  by  the  death  of  Mr.  Bell.  Mr.  Edward  L.  Heydecker. 
When  Mr.  Delany  resigned  you  designated  Mr.  Francis  Key 
Pendleton  as  a  member  of  the  Commission  in  his  stead.  The  va- 
cancies caused  by  the  death  of  Mr.  Barney  and  Mr.  Jesup  have 
been  filled  by  Messrs.  Herman  A.  Metz  and  David  E.  Austen. 

The  Commission  met  on  March  6,  1905,  and  elected  Mr.  Law- 
son  Purdy  as  secretary ;  in  your  letter  you  had  named  Mr.  Edgar 
J.  Levey  as  chairman.    Three  sub-committees  were  appointed  on 

Taxation  and  Revenue, 

City  Debt  and  Special  Assessments,  and 

Accounting  and  Statistics, 

and  to  them  were  referred  the  several  subjects  mentioned  in  your 
letter  of  appointment.     From  time  to  time,  as  each   sub-corn- 


I 


mittec  completed  its  examination  of  the  portion  of  the  work  re- 
ferred to  it,  it  reported  to  the  Commission,  and  five  separate  re- 
ports'have  been  presented  to  you  by  the  Commission,  copies  of 
which  are  annexed  to  this  report  as  appendices. 

The  first  report  presented  by  the  Commission  was  in  Decem- 
ber, 1905,  upon  the  subject  of  the  City's  uncollectible  arrears  of 
taxes.  It  was  shown  that  the  uncollected  taxes  on  October  i, 
1905,  for  the  years  i8q8  and  prior,  amounted  to  $12,700,872.39, 
and  that  the  uncollected  taxes  outstanding  on  October  i,  1905, 
for  the  years  1899  and  1904  inclusive,  amounted  to  $50,823,942.21, 
miaking  a  total  of  $63,524,814.60. 

The  Commission  has  made  an  estimate  of  the  exact  sum  un- 
collectible and  had  found  it  to  amount  to  $33,791,172.95,  of 
which  amount  over  $30,000,000  was  on  account  of  uncollected 
personal  taxes.  The  method  by  which  this  conclusion  was 
reached  and  the  reasons  supjx>rting  it  are  fully  set  forth  in  the 
report  submitted  to  you  on  December  22,  1905.  Having  ascer- 
tained the  total  of  uncollectible  taxes,  also  having  ascertained  that 
this  sum  was  increasing  under  the  methods  in  force  at  the  time 
by  a  sum  approximating  $3,000,000  a  year,  the  Commission  un- 
dertook the  drafting  of  legislation  to  meet  this  condition,  and 
submitted  a  series  of  bills  to  the  Legislature  of  1906.  Three  of 
these  bills  were  enacted  as  chapters  207,  208  and  209  of  the  Laws 
of  1906. 

By  chapter  208  of  the  Laws  of  1906,  the  Board  of  Estimate 
and  Apportionment  of  The  City  of  New  York  was  directed  to 
authorize  corporate  stock  of  The  City  of  New  York  to  be  issued 
to  any  amount  equal  to  so  much  of  the  deficiency  on  the  first  dav 
of  January,  1905,  in  the  product  of  taxes  theretofore  levied  and 
deemed  by  the  Board  to  be  uncollectible  as  shall  not  have  been 
provided  for  in  prior  tax  levies  or  by  the  issue  of  corporate  stock 
of  The  City  of  New  York.  The  intent  of  this  act  is  to  permit  the 
funding  of  the  total  of  arrears  of  uncollectible  taxes  up  to  the 
date  named,  January  i,  1905,  and  thereby  to  wipe  out  the  uncol- 
lectible arrears  up  to  that  date.  When  all  of  the  corporate  stock 
authorized  by  this  act  shall  have  been  issued  the  uncollectible 
arrears  up  to  January  i,  1905,  will  have  been  funded  and  will  dis- 
appear from  the  City's  bocks  of  accounts  as  unpaid  taxes. 

By  chapter  200  of  the  Laws  of  1906,  amending  section  248 
of  the  Greater  New  York  Charter,  the  Board  of  Estimate  and 


Apportionment  was  directed  annually  to  include  in  the  budget 
a  sum  ecjual  to  so  much  of  the  deficiency  on  the  preceding  first 
day  of  January  in  the  product  of  taxes  theretofore  levied  and 
deemed  by  the  Board  to  be  uncollectible  as  shall  not  have  been 
provided  for  in  prior  tax  levies  or  by  the  issue  of  coqxjrate  stock 
of  The  City  of  New  York  or  by  such  corporate  stock,  duly  au- 
thorized by  said  Board  to  be  issued.  The  intent  of  this  law  is 
to  provide  a  way  by  which  the  amount  of  uncollectible  taxes, 
ascertained  each  year,  may  be  included  in  the  budget  for  the  en- 
suing year  and  may  be  stricken  off  from  the  City's  books  of  ac- 
counts as  assets,  lender  the  operation  of  these  two  laws,  wlien 
the  discretion  vested  by  them  in  the  Board  of  Estimate  and  Ap- 
portionment shall  have  been  fully  e>:ercised,  no  uncollectible  ar- 
rears should  any  longer  appear  on  the  City's  books  of  accounts 
as  assets. 

The  other  law  enacted  in  1906,  printed  as  chapter  207,  adding 
section  894-a  to  the  Greater  New  York  Charter,  was  intendetl 
simply  to  cure  an  administrative  defect.  By  its  provisions  the 
Dq:)artment  of  Taxes  and  Assessments  was  authorized  on  giving 
ten  days'  personal  notice  to  the  party  in  interest,  to  add  to  the 
assessment-rolls  of  the  current  year  such  valuations  of  real  and 
personal  estate  as  may  have  been  omitted  from  such  assessment- 
rolls  on  the  first  day  of  the  opening  of  such  books.  This  power 
did  not  exist  prior  to  the  passage  of  this  law. 

The  second  report  of  the  Commission  was  presented  in  De- 
cember, 1906,  and  was  a  review  of  the  question  of  the  taxation 
of  personal  property.  The  report  considered  the  eflFect  of  the 
taxation  of  personal  property  in  The  City  of  New  York,  and 
found  that  the  law  was  impracticable  of  operation  and  unfair  in 
so  far  as  it  was  enforced.  'Yhe  Commission  did  not  present  any 
drafts  of  bills  to  carry  out  its  conclusions,  but  recommended  that 
this  question  is  of  immediate  importance  to  the  City,  and  sug- 
gested for  your  consideration  the  desirability  of  bringing  the  mat- 
ter to  the  attention  of  the  Governor  and  the  State  Legislature. 

This  report  was  quoted  with  approval  by  the  Charter  Re- 
vision Commission  of  1907,  and  they  recommended  that  the  ques- 
tion of  .personal  property  taxation  should  be  submitted  to  a  vote 
of  the  people  of  The  City  of  New  York. 

In  December,  1907,  a  report  was  presented  by  the  Commis- 
sion on  the  collection  of  arrears  of  real  estate  taxes  and  assess- 


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ments.  This  report  reviewed  the  existing  method  of  enforcing 
the  payment  of  arrears  of  real  estate  taxes  and  assessments  and 
water  rents,  and  found  that  these  methods  were  wholly  inade- 
quate to  enforce  the  rights  of  the  City.  Accordingly,  the  Com- 
mission reported  a  hill  to  amend  the  Greater  New  York  Charter 
relative  to  sales  of  lands  for  taxes,  assessments  and  water  rents, 
which  was  enacted  by  the  Legislature  of  1908,  and  which  went 
into  effect  on  October  i,  1908. 

By  the  jirovisions  of  this  Act  the  old  method  of  enforcing 
such  charges  by  the  sale  of  a  lease  was  abolished  and  in  its  place 
is  substituted  a  method  requiring  the  sale  of  the  tax  lien  of  the 
City  to  the  person  who  will  pay  into  the  City  Treasury  the  amount 
of  the  taxes,  assessments  and  water  rents,  with  interest,  penalties, 
and  charges,  for  the  lowest  rate  of  interest  upon  a  competitive 
bidding.  The  lien  of  the  City  is  to  be  transferred  to  the  pur- 
chaser by  an  instrument  to  be  known  as  a  "  transfer  of  tax  lien," 
and  which  by  the  terms  of  the  Act  is  assimilated  as  closely  as  pos- 
sible to  a  mortgage  on  real  estate.  The  delinquent  taxpayer  is 
allowed  three  years  in  which  to  pay  off  and  discharge  this  trans- 
fer of  tax  lien,  and  in  the  event  of  his  default  the  foreclosure  of  the 
tax  lien  is  provided  for  in  a  court  of  record  by  a  procedure  similar 
to  the  foreclosure  of  a  mortgage.  The  substance  of  this  change 
is  the  substitution  of  a  judicial  foreclosure  whereby  the  rights  of 
all  parties  in  interest  may  be  protected  for  the  administrative  act 
of  the  Collector  of  Assessments  and  Arrears  in  an  ex  parte  pro- 
ceeding. As  the  law  became  operative  on  October  i,  1908,  the 
Commission  is  unable  to  report  upon  the  results  of  its  administra- 
tion, but  it  believes  that  the  Collector  of  Assessments  and  Ar- 
rears will  be  successful  in  collecting  the  greater  part  of  the  ar- 
rears of  real  estate  taxes,  assessments  and  water  rents,  by  means 
of  the  active  and  efficient  efforts  which  he  is  taking  to  carry  out 
the  provisions  of  the  Act. 

In  April,  1907,  the  Commission  submitted  a  report  on  the  City 
debt  in  its  relation  to  the  constitutional  limit  of  indebtedness, 
containing  a  proposed  amendment  to  section  10  of  Article  \  III. 
of  the  State  Constitution.  This  report  carefully  considered  the 
question  of  the  margin  of  debt  incurring  capacity  of  the  City.  It 
was  ascertained  that  on  January  i,  1907,  this  margin  amounted 
to  $31,143,218.73,  and  that  the  total  bonded  indebtedness  of  the 
Citv  at  that  time  amounted  to  the  sum  of  $544,522,362.23.     The 


I 


I 


report  also  considered  the  factor?  enlarging  the  City's  future 
debt  incurring  capacity,  and  also  the  probable  future  indebtedness 
to  be  incurred,  and  reached  the  conclusion  that  if  it  is  inevitable 
that  the  debt  incurring  |X)vvcr  of  tlic  City  should  be  enlarged  such 
enlargement  should  be  accomplished  only  by  authorizing  the  ex- 
clusion from  the  bonded  indebtedness  to  be  charged  against  the 
City's  debt  limit,  of  bonds  issued  for  the  acquisition  of  property 
or  for  the  construction  of  railroads,  docks  or  other  improvements, 
owned  by  the  City,  from  which  the  City  rcxreives  current  net  in- 
come in  excess  of  the  interest  payable  by  the  City,  and  that  any 
constitutional  amendment  designed  to  accomplish  this  should  pro- 
vide a  nearly  automatic  scheme  by  which,  should  such  enterprises 
ever  become  non-supporting,  the  bonds  issued  to  defray  the  cost 
should  immediately  be  counted  in  estimating  the  City's  indebt- 
edness. In  the  amendment  to  section  lo  of  Article  VIII.  of  the 
Constitution  presented  by  the  Commission  in  this  report,  careful 
provision  was  made  safeguarding  the  City  from  the  continued 
exclusion  of  debt  incurred  for  the  acquisition  of  propverty  not 
sufficiently  productive  as  to  pay  interest  charges. 

This  question  of  enlarging  the  debt-incurring  power  of  the 
City  was  considered  by  the  Legislature  of  1908,  and  an  amend- 
ment to  section  10  of  Article  VHI.  of  the  Constitution,  based  ui>on 
the  report  of  the  Commission,  was  passed  by  the  Legislature. 

In  June,  1907,  the  Commission  presented  a  report  on  the  sys- 
tem of  accounts  and  statistics  of  The  City  of  New  York.  The 
existing  system  was  analyzed  and  its  defects  pointed  out.  Briefly, 
these  were  shown  to  be  ( i )  a  lack  of  a  system  of  controlling  ac- 
counts; (2)  a  lack  of  uniformity  of  an  accounting  system  in  the 
different  departments,  and  (3)  a  lack  of  control  over  expenses  in- 
curred in  the  different  departments,  and  (4)  a  failure  to  furnish 
detailed  information  as  to  expenses  incurred.  The  Commission 
suggested  the  outline  of  a  general  accounting  system  whereby  in 
addition  to  securing  uniformity  of  accounting,  the  Comptroller 
should  be  given  a  wider  control  over  the  departmental  account- 
ing heads.  The  Commission  also  suggested  that  the  Comptroller's 
office  is  overburdened  with  administrative  detail,  and  presented 
alternative  recommendations  designed  to  remedy  this  condition. 

The  Comm/ission  has  considered  the  propriety  of  a  change 
in  the  time  for  collection  of  taxes,  and  has  reported  its  conclu- 
sions against  the  proposed  change.  The  real  reason  for  the  urgent 


N; 


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10 


demands  made  during  the  past  few  years  for  a  change  in  the 
date  for  the  collection  of  taxes  is  the  large  deficiency  in  the  col- 
lection of  taxes.  The  past  deficiencies  due  to  uncollectible  taxes 
have  been  provided  for  by  the  authorization  of  an  issue  of  cor- 
porate stock  and  current  deficiencies  are  provided  for  annually 
in  the  budget  under  the  provisions  of  the  laws  enacted  pursuant 
to  the  reports  of  this  Commission.  A  further  deficiency  in  the 
current  funds  of  the  City  is  due  to  the  inability  of  the  City  to 
enforce  the  collection  of  taxes  on  real  estate.  The  former  remedy 
for  the  collection  of  taxes  on  real  estate  by  the  sale  of  leases  was 
so  ineffective  that  it  has  been  resorted  to  but  six  times  in  thirty- 
two  years.  The  amendment  to  the  charter  reported  by  this  Com- 
mission and  enacted  by  the  last  Legislature  will  relieve  this  sit- 
uation, and  under  these  changes  the  Commission  believes  that 
the  reasons  for  the  suggested  change  will  disappear. 

We  have  reported  upon  all  the  subjects  submitted  for  our 
consideration,  and  bills  have  been  enacted  to  carry  out  our  recom- 
mendation for  legislation. 

In  May,  1905,  $12,000  was  appropriated  for  the  expenses  of 
the  Commission,  and  the  sum  of  $3,456  has  been  expended,  mainly 
for  printing.  There  will  be  no  further  expenses  except  the  print- 
ing of  this  report. 

Having  completed  the  work  assigned  to  us,  we  respectfully 
present  this  as  our  final  report  and  request  our  discharge. 


Edgar  J.  Levey,  Chairman. 
Lawson  Purdy,  Secretary. 


^o413< ->»*«**  o^Wi 


JflL^OTOM 


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COLUMBIA  UNIVERSITY  LIBRARIES 

This  book  is  due  on  the  date  indicated  below,  or  at  the 
expiraUon  of  a  definite  period  after  the  date  of  borrowing,  as 
provided  by  the  library  rules  or  by  special  arrangement  with 
the  Librarian  in  charge. 


DATE  •ORROWCO 

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OATS  BOMIOWCO 

DATE  DUE 

1 

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, 

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rub  ^ 

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I 

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■   1 

CM(a**S)«>OM 

■" 

• 

• 

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34^3 


'■JLmSmmkm 


Jioiv  York  (City)  Advisory  comm- 

ission  on  taxation 
_Full  and  draft  reports,  1905 -08. 

(■£8  5    1968^ 


.■i-»-i-i— .^j  •■         '-■'•••ii   -iV  «  I,'  ""   .    _, 


DEC  1  4  1954 


JUL  Z  4  t9S3 


END  OF 

TITLE 


